Yield of Dreams

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Happy Thursday!

That’s right, folks, it’s already Thursday… So let's all take a moment to appreciate the joys of a short week. (Cue the blissful sigh, at least from our readers in the US.)

Now, down to business. Just before the long weekend in the US, the Supreme Court issued a ruling that limited the EPA’s ability to regulate carbon emissions from power plants, raising a lot of questions about the United States’ ability to reduce its carbon footprint and stand behind the commitments it has made to domestic and international communities.

While many agree this action will likely slow progress on our world’s climate change goals, we’ve had a week to put it into perspective and, for those FWIW readers prioritizing sustainability when investing, we hope you will also see it as an opportunity to bring to the fore companies that truly align with your values and weed out those that don’t. Some ideas for investors like you: review what’s in your portfolio to confirm everything aligns with your values and goals (one way to analyze the fossil fuel exposure and carbon footprint of funds: Fossil Free Funds). Then, look closely at areas like renewables, agriculture, alternative fuels, green banks, and companies taking real action to hit Net Zero targets. These are some of the areas where, if sustainability is a value you prioritize, your investments can drive more capital to companies creating the world you want to see. It is like your hidden superpower while the courts and the government battle it out.

In financial news this week, economists and Wall Street analysts are still signaling that a recession lies on the horizon, although many consumers feel it’s already sunset as they grapple with higher prices on everything from gas to groceries. And we learned the Federal Reserve may raise interest rates again in July by another half or three-quarters of a percentage point to help tame inflation. While the stock market is still digesting what this really means (no surprise there), rising interest rates make this an ideal time to shop around for a higher yield savings account. Check out our tips below for finding the right match for your goals and values.

News you can use

• California has passed a landmark law against single-use plastic just in time for #PlasticFreeJuly. Nearly 23 million tons of the disposable stuff — equivalent to 26 Golden Gate Bridges — will be avoided by 2032, according to one estimate. The law also makes plastic producers pay $5 billion to mitigate the effects of plastic pollution. Just 20 companies are the source of more than half of single-use plastic items thrown away globally. California’s new law may prompt some to hit the FWIW glossary for a refresher on negative screens.
• This week 35 Christian institutions from around the world, including two US universities, signed onto “Operation Noah” (love the name!) to divest from fossil fuels. They join the more than 1,485 organizations with total assets over $39.2 trillion that have committed to some form of fossil fuel divestment. Thirty-five percent of all divestment commitments globally are faith-based, according to the 2021 Invest/Divest report.
• The US dollar and EU Euro are almost at parity. With the Euro at a 20-year low due to recession fears and the multifaceted impacts of the war in Ukraine, and the US dollar increasing in value as investors seek a “safe haven” amid economic turmoil and stronger yields (see below on how you might be able take advantage of this), the currencies are nearing the historic $1 = €1 mark. One benefit: That plan to live life like “Emily in Paris” just got a little cheaper.

Time to spruce up your savings?

Long overlooked over the past decade of record-low interest rates, it may be time to say hello (again) to savings accounts. With inflation eroding the value of our money, the Federal Reserve raising interest rates, and investors (particularly those who read FWIW) always holding some cash on the sidelines to weather storms or take advantage of opportunities, it’s a good time to take another look at the benefits of certain types of savings accounts.

Why Savings Accounts?

In previous editions we’ve talked about the importance of maintaining easily accessible or “liquid” cash for emergencies in a risk-free place. Experts recommend that this emergency fund should be worth at least three to six months of living expenses — 🎉 to those who got that right on our latest quiz. But what can you do with that money so it continues to work for (not against) you? One option is to deposit this money in a high-yield savings account.

Swipe for the Right Match

Most banks will offer you a joint checking and savings account when you become a customer. But there’s a growing trend of Americans looking beyond their primary bank for the best bang for their buck. Data analytics firm FICO says 46% of US consumers have some or all their savings in a bank other than their primary; 28% are choosing an online bank. Thirty percent of consumers opened a new account with a bank outside of their primary bank in the past year.

Despite the inconvenience of holding accounts at different banks and dealing with transfers, it can pay (literally) to look for the best deal. Here we’ll explore the steps you should take as you search for the best savings account in these times of market volatility and rising interest rates.

Step 1: Find High Yield

The national average interest on savings accounts was 0.08% as of June 21, but it’s possible to get over 10 times that if you shop around. This is especially true for the new wave of high-yield savings accounts that are being offered by a number of online banks. If you’re comfortable not having a brick-and-mortar location to visit, this could be for you.

On a bank website, look for the APY, or annual percentage yield, advertised for a savings account. This is the amount you’ll earn on your deposit each year after taking into consideration compound interest (the money you earn on your accumulated interest). The higher the APY, the faster your money will grow. For example, Lending Club’s online savings account earns 1.26% APY, Marcus by Goldman Sachs is offering 1.20% and BrioDirect’s high-yield offering appears to be at the top of the pack with a 1.8% APY.

Remember, this APY can change at any time in the future after you open an account, and sometimes banks offer better introductory APY rates for a short period only. But with the Fed on a rate hike spree, high-yield savings accounts we have been watching are pushing rates up quite quickly, which makes this a good time to be a saver.

Step 2: Is the Bank Insured?

Now that you’ve found yield, make sure you won’t lose your money on the rare chance the bank fails. If a bank is insured by the FDIC (Federal Deposit Insurance Corporation), all customer deposits up to $250,000 are insured. To find out, you can ask a representative, check the bank’s website, or check on the FDIC's BankFind tool.

Step 3: The Fine Print

Saving accounts may vary on things like monthly maintenance and other fees, deposit options, minimum balance required, and availability of ATM cards. There may also be different promotional offers and perks, like a cash bonus on opening the account. Make sure you look into all the details and find something that works for your lifestyle and goals.

Bonus Step: Green Banking

The money you put into a savings account will be loaned out to other customers, and if you bring a particular value perspective to your investing, you may want to look into the kinds of activities the bank supports. For example, does it have eco-friendly policies like avoiding drilling in the Arctic? Or does it lend to minority communities at risk of being unbanked? You can read more here.

What About Crypto Banks?

Digital currencies may change finance forever, but they’re still in their Wild West stage at the moment. Recent examples of this are cryptocurrency “banks” like Celsius, BlockFi, Voyager Digital, and Vauld, that promise high interests on coin deposits. As the market plunged this year, these lenders were forced to halt withdrawals to stay afloat. Crypto savings deposits are not FDIC-insured, either. So, if you’re considering putting your coins in one of these quasi-banks, keep in mind that the regulation is low and the risk is high.

Before you go -

What do cacti, pineapple leaves, and palm leaves have in common? High-end brands are all using them as environmentally-friendly alternatives to leather.

** FWIW team members own shares of Goldman Sachs.