The Federal Reserve on Wednesday delivered an expected “pause” in interest-rate hikes, while indicating that rates could still be pushed higher later this year. In the short term, that could be good news for savers, as interest rates for high-yield savings accounts and other low-risk accounts have been moving up along with the Federal Reserve’s fed funds rate.
One option for savers who have ambitions to become investors, or for those who need a cash account that works like a savings account, is to turn to a robo-advisor—a digital platform offering automated, algorithm-driven financial planning and investment services with little to no human supervision. Many of their cash accounts feature rates that are competitive with bank high-yield savings accounts.
While robo-advisors primarily are used for their investment accounts that can buy stocks, bonds, or exchange traded funds (ETFs), most also have so-called cash accounts, which offer a variable annual percentage yield (APY) that's in line with other high-yield savings accounts.
These cash accounts aren’t the same as the investment accounts offered by robo-advisor services; the interest rates offered on their cash accounts are supported by the current fed funds rate, not portfolio growth. But for savers who hope to become investors, some cash accounts at robo-advisors offer APYs that can reach up to 5%, just slightly lower than the 5.12% top rate some high-interest savings accounts are paying.
By working with several financial institutions, robo-advisors are able to offer levels of Federal Deposit Insurance Corp. (FDIC) protection well above the standard $250,000 coverage.
The top robo-advisor cash account as of June 16 is offered by M1, which offers a high-interest savings account with an APY of 5.00%.
On its Cash Account, Wealthfront offers a 4.55% APY for the entire balance, with up to $5 million insured by the FDIC, while the required minimum balance to open one of these accounts is just $1.
Another high-interest option comes from Betterment, which offers a 4.50% APY on its Cash Reserve account. Its program offers $2 million in FDIC protection, but also offers a “cash goals” feature that lets savers separate their funds into buckets to track progress.
Empower currently offers an APY of 4.45% on its “Personal Cash” program, while pairing it with $5 million in FDIC protection.
For those in the market for high returns, alternatives to robo-advisor cash accounts sometimes offer even higher rates. Top CDs and high-yield savings accounts are offering more than 5% to customers.
Signing up with a robo-advisor to obtain a cash account usually entails completing a short, risk-profiling questionnaire and evaluating your financial situation, time horizon, and personal investment goals. In many cases, you will have the opportunity to link your bank account directly for quick and easy funding of your robo-advisory account.
A feature of automated advisory services is their ease of online access. Many digital platforms target and attract Millennial and Generation X investors who are technology-savvy.
Every business day, Investopedia tracks the rate data of about 100 banks and credit unions that offer high-yield savings accounts to customers nationwide. We determine daily rankings of the top-paying savings accounts first and foremost by the annual percentage rate (APY) offered.
To qualify for our lists, the institution must be federally insured (FDIC for banks, National Credit Union Administration [NCUA] for credit unions), and the savings account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more.
For more about how we choose the best high-yield savings accounts, read our full methodology.