5 ways a high-yield savings account will boost your overall savings

Putting cash into your savings account is important for short-term savings goals like emergency funds, vacations, down payments, and more. But depending on where you do your banking, you may be leaving money on the table.

Here’s what you need to know about high-yield savings accounts and how they can help you with your savings goals.

WHY IT’S A GOOD IDEA TO PUT SOME MONEY IN A HIGH YIELD SAVINGS ACCOUNT

1. You can earn much more from your savings

The national average interest rate on traditional savings accounts is 0.04%, according to the Federal Deposit Insurance Corporation (FDIC). But with a high-yield savings account, you can get 10 times more or even more.

While this may not make a big difference on smaller balances, it can add up over time. The most dramatic gains will be seen in savings accounts with larger deposits and opening balances.

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2. You can save on commissions

High-yield savings accounts are common among online banks, which tend to have lower overall costs than traditional banks. As a result, these banks also often offer fee-free checking accounts.

By moving all your banking to an online bank, you’ll have a better chance of getting a checking account that doesn’t charge you a monthly fee. Some of these accounts also waive other important fees, such as maintenance fees, overdraft fees, ATM fees and more; some even reimburse ATM fees on out-of-network withdrawals.

HOW TO CHOOSE A HIGH YIELD SAVINGS ACCOUNT

3. Easy and liquid access

Because high-yield savings accounts often offer lower rates than certificates of deposit (CDs), you may wonder if a CD is a better place to keep your cash. However, these accounts typically require you to lock in your funds for a certain period of time, which can range from a few months to several years.

If you try to make a withdrawal from your account before the term of the CD ends, you could lose some or all of the interest you have earned up to that point. If you’re not sure whether a high-yield savings account or CD is right for you, talk to a financial advisor to determine which savings generator fits your needs.

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4. Safe and insured return

You may also wonder if investing your money for short-term savings goals is the best move. After all, the stock market can provide a much higher return than you would get from a high-yield savings account.

But while long-term market returns average up to 10%, the market can be incredibly volatile in the short term. If you invest your emergency fund or down payment savings and your portfolio doesn’t perform well, you could end up losing money and be in a worse position than when you started.

In contrast, your balance will never drop with a high-yield savings account, which is exactly what you need for short-term savings goals, and even some long-term goals.

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5. Low minimum balance requirements

With some traditional banks and credit unions, you need to have a large balance in a savings account in order to earn their highest interest rate. On the other hand, with many high-yield savings accounts, you’ll typically earn a high rate regardless of your balance.

5 MYTHS ABOUT HIGH YIELD SAVINGS ACCOUNTS

The bottom line

Putting money into a savings account is often the best plan for meeting your short-term savings goals. But most savings accounts offer almost nothing in the way of interest.

High-yield savings accounts can offer much higher interest rates, give you access to checking accounts with lower monthly fees (or no fees), and also provide better liquidity and security than many alternative places where you can put your money

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