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What’s the difference between a Brokerage and High-Yield Savings Account

We are switching things up a bit this week. We’re starting with our quiz first, then we’ll dive into more details about our quiz topics later on in this newsletter.

This week’s quiz

Question 1

Question 2

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Making more than $100K per year? Questioning how much money you should have in a brokerage account versus a high-yield savings account? Come talk to us. We help H.E.N.R.Ys make financial freedom inevitable.

Quiz Answers

Question 1

Answer: B (False)

Money in a brokerage account can be placed in a money market account whereas money in a high yield savings account remains with the bank. However, a money market fund comes with fees that eat into returns whereas high-yield savings accounts do not. Still money market funds have some advantage such as the availability of money market funds that are tax-exempt whereas all high-yield savings accounts will be subject to taxes on the gains.

Question 3

Answer: A (True)

The flexibility to easily invest in other assets, or keep money in a safer investment like a money market fund is a advantage of a brokerage account over a high-yield savings account. Brokerage accounts typically have the option of investing in a large variety of different assets including mutual funds, CDs, bonds, ETFs, and individual stocks. High-yield savings accounts usually require you to transfer the money to a brokerage, which is a process that may take a couple days or require payment of a fee to expedite the process.

For the reasons above, brokerage accounts are usually reserved for money that you are investing or keeping on the sideline to be invested. High-yield savings account are reserved for money that you are saving—money for a rainy day that you do not want to lose.

For more info on high-yield savings accounts, check out are article here.

For more info on brokerage accounts, you can check out are article here.