While Max members have always earned much more on cash than the typical American depositor, as interest rates rise, the benefits of using Max are increasing even further. Since 2014, the incremental yield, or alpha, that Max has generated for its members has increased from 0.76% to 1.23%.
According to Bankrate.com, the national average interest rate earned on savings accounts is 0.09%. Max members, however, are earning dramatically more — 1.42% on balances up to $250,000, and an average 1.32% on larger balances up to $1,000,000.
Why does earning more on cash matter? Because interest compounds over time, meaning that the gap between those who manage their cash wisely and those who don’t widens as years go by. Since all FDIC-insured savings accounts carry a government guarantee and are essentially risk-free, focusing on the banks that can deliver the highest yield makes sense. Leaving your money in a brick-and-mortar savings account that pays the national average — or worse — means you are missing out on the opportunity to earn an additional 1.23%, on average, without taking any additional risk with your money. In fact, because of Max’s feature that helps spread cash across multiple banks to maximize FDIC insurance coverage, many Max members are earning higher yield while taking less risk.
While online banks have gradually raised rates over the past several months, brick-and-mortar banks have yet to do so in a significant fashion. Online banks are able to offer higher interest rates to savings-account holders because they don’t have physical branches to maintain. This means that if you don’t keep your cash in online banks, you likely aren’t keeping pace with rising rates.
For financial advisors, the ability to help clients earn more on their held-away cash — typically cash that advisors don’t see — is a major reason why many are recommending Max to their clients. As a fiduciary, charged with looking out for their clients’ best interest, many advisors feel it is imperative to offer Max to their clients. Incremental yield on cash is, after all, the same as incremental yield anywhere else in a client’s portfolio — but in the case of FDIC-insured cash, it comes without risk.
To learn more about how Max can help you or your clients earn more on cash, visit MaxMyInterest.com or MaxForAdvisors.com.
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