The Golden Age of Cash begins with Apple's 4.15% savings account

A high-yield savings account has seen a resurgence after years of low interest rates. 

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With the announcement of its new partnership with Goldman Sachs Group Inc. this week, Apple Inc. introduced a new product that allows Apple Card holders to earn an annual yield of 4.15% no matter what their credit score is. Goldman has also recently bumped up the rate on its popular Marcus account - the posterchild for high-yield savings accounts - to a record 3.9%, which is a record for a savings product.

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Cash investments are gaining in popularity over recent years, as they are offering solid returns after years of near-zero rates and provide investors with a level of safety during these times of recession. Why would one risk a loss in the stock market if savings products are offering such high yields? That is the reasoning behind the high yields offered by savings products.

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As a way of helping you weigh the benefits of a high-yield savings account versus investing in the stock market, we asked financial experts what you should consider. 

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Cost of Opportunity 

As tempting as it is to invest in high interest savings products, even Apple's 4.15% yield would still be less than inflation. Inflation was up 5% last month from a year earlier, which indicated a slower pace of inflation in the near future.

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Although the balance in your savings account will continue to increase due to increased interest rates, the rate of growth of your savings account will fall behind the price increases of everyday goods, according to Jarrod Sandra, the owner of Chisholm Wealth Management in Texas. 

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Karen Ogden, a partner at Envest Asset Management in Connecticut, warns that investing in the stock market is still one of the best methods for beating long-term inflation for investors. 

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She explained that the key is to know how long you have to wait before taking the risk and how much you can stomach. 

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It is not beyond reason for investors to worry about near-term stock volatility: In anticipation of a possible recession and concerns about a decline in corporate profits, hedge funds have been pumping money into the market by betting on the market falling. 

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A diversified portfolio of stocks, however, remains the best option for those who won't require the money within the next five or more years, according to Mike Hunsberger, owner of Next Mission Financial Planning, for those who don't need the funds within that period.

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The taxability of interest

The interest earned on high-yield savings accounts may not be apparent to some investors, even if they don't take a distribution from the account, yet the interest that is earned is subject to taxation in the year in which it is earned. 

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As an alternative, you can invest your money in US government bonds, where you may have to tie up your money for a bit longer, but you still get a higher rate, you can defer taxes until you cash out, and you can avoid state taxes altogether. Those are the advantages of US government bonds, according to Elliot Pepper, Northbrook Financial's director of tax. 

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Most investments will eventually be subject to taxation, but if you invest in other options - such as stocks and bonds - you won't have to pay taxes until you sell them after you have made the investment.  

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A high-yield savings account requires a minimum of three to six months worth of living expenses. According to Jeremy Keil, a financial adviser at Keil Financial Partners in Wisconsin, this amount is the best amount to put into the account. If your investment plan goes higher than that, then you could invest for the long run. 

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The security risks

There is no doubt that investing your money in an institution that is insured to the limits of the Federal Deposit Insurance Corporation up to $250,000 is critical because the collapse of Silicon Valley Bank last month highlights this point. 

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Noah Damsky, principal at Marina Wealth Advisors in California, recommends spreading out the amount you have in high-yield savings accounts.

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There is a convenient option if you are approaching the FDIC's limit for investing in Treasury bonds at the same institution instead of going to a new institution in order to remain within the FDIC's limits," the manager noted. 

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Alternatively, there are services that are available that will do this for you, taking cash above the limits of FDIC insurance in one bank and distributing the additional money to other FDIC-insured institutions by electronic means. 

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The Northbrook Financial's Pepper warns clients of the inherent risk that comes with having so much of your personal information in a single organization, especially in regards to the new Apple product in particular. 

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Having your phone become a de facto bank could cause more headaches in the event that someone loses their phone, has it stolen or has their Apple ID hacked, he said. "No one appreciates losing or stealing their iPhone, and turning your phone into a de facto bank may simply make this worse." 

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As well as the Apple Card, you will need to apply for one in order to make the most of the new savings account. If you think that getting an Apple Card will tempt you to spend more money than you have set aside, it may be best to avoid signing up for one altogether.