Girl Math and the Magic of the Little Treats Fund
First, let’s talk about the high-yield savings account, or the HYSA. The interest from this account will make up the Little Treats Fund.
A HYSA is simply a type of savings account that offers an interest rate significantly higher than a standard savings account. The main selling point of a HYSA is the higher annual percentage yield (APY), often 10 to 20 times higher than what you'd get in a traditional savings account. Rates can vary, but they typically range from 3% to 5% annually. A traditional savings account usually offers an APY of only 0.01% to 0.05%.
Like regular savings accounts, HYSAs are usually insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank. This means your money is protected even if the bank fails. The accounts are low-risk because your money is not subject to market fluctuations. You are guaranteed the interest rate, and your balance is insured.
Many of the best high-yield savings accounts are offered by online banks. Two really solid options are Marcus by Goldman Sachs and Ally Bank. Neither have monthly fees (side note: never use a bank with a monthly fee—there are plenty of excellent checking and savings accounts offered by banks with $0 in monthly fees—use one of those).
A HYSA is a good option for your emergency fund or short-term savings while earning more interest than in a regular savings account.
Now to the Little Treats Fund…
The Little Treats Fund is the monthly interest you receive from your HYSA!
For example, if you have $25,000 saved in a HYSA with a 4% APY, you will make about $80 a month on that money without contributing any extra money.
That $80 is the Little Treats Fund, a sacred fund to be spent only on fun stuff. Your Little Treats Fund will vary depending on how much you have saved in your HYSA, but if you have a solid plan in place for spending, saving, and investing already, I encourage you to have some fun with the interest you earn in your savings account, especially if you aren’t much of a spender naturally. If you are frugal, this could be a good way to actually get yourself to spend a little money on the things you enjoy and not feel guilty about it.
I like to use my Little Treats and Fund to purchase oat milk lattes when I’m out and about. And because the Little Treats Fund is money from interest (i.e. I didn’t have to work for it), girl math tells me those lattes are basically free. Everyone loves a free latte.
