Don’t have a high yield savings account? Here’s how you’re losing money

Building savings is personal finance 101. Even as young children, many of us are taught to save our change in piggy banks, and for good reason. No matter how confident you are in your financial plan, any number of things can disrupt it, from a sudden illness to job loss. Having healthy savings makes these setbacks easier. A savings account can also help you set aside money for a specific goal, such as a wedding or a new car.

However, not all savings accounts are created equal. If you don’t put your money in the right type of account, you could be missing out on opportunities to grow that money quickly.

According to Bankrate’s 2023 Online Savings Survey, only 1 in 5 Americans with a savings account earns 3% or more About a quarter of these savers earn less than 1%, while 16% earn no interest at all. That is absolute trifle in comparison Best High Yield Savings Accountwhich may offer 5% or more depending on the rate environment.

In other words, 80% of savers are essentially spending free money. Here’s why — and how you can earn more if you’re one of them.

Check out current savings rates here to find out how much more you can earn with a high-yield account.

How you’re missing out by not having a high-yield savings account

There is a reason High Yield Savings Account Called “high yield.” They charge more interest than that Regular savings account. And by “more” we mean “more than enough.”

Currently, the average APY (annual percentage yield) for regular savings accounts is 0.39%, according to FDIC information. On the other hand, high-yield accounts have APYs of around 3.5% to 4.5% (or more).

What does that difference look like for your savings? Let’s say you have $1,000. At 0.39% in a regular savings account, you’ll earn $3.90 in interest over 12 months. By contrast, in a high-yield savings account at 4.5%, you’ll earn $45.

The more you save and the longer you keep it in the account, the bigger the difference will be with no extra effort on your part. This is a compelling reason Open a high yield savings account today.

“Given where interest rates are today, this is a great time to take advantage and start earning extra returns,” said William Bevins, CFP, CTFA. “Every extra dollar helps.”

Start exploring high-yield savings accounts by reviewing current rates online now

What to Look for in a High-Yield Savings Account

There are plenty of high-yield savings accounts to choose from. To find the best one for you, look for these things:

• Maximum Rate: High-yield savings always beat regular savings, but how much you beat them depends on the account. Take time to compare your options and, all other things being equal, go for the account with the highest APY
• Fees: Because high yield savings accounts are often provided by Online Bank, they have lower fees than brick-and-mortar banks that have higher overhead costs This often means you enjoy low fees or no fees at all. Read the terms of any account you’re considering to see what fees you may incur.
• Minimum Balance Requirements: Some accounts require you to deposit a certain amount to open an account or maintain a certain balance to avoid fees. Look for accounts with low requirements to keep as much of your money as possible
• Federal Deposit Insurance: Although many banks and credit unions are FDIC- or NCUA-insured, you should still double check before opening an account at any institution. If the institution is insured, your deposits will be protected up to $250,000 per account if it fails. If not, you may lose your savings.

Bottom line

Whether you are building one emergency fund or saving for a specific goal, opening a high-yield savings account (or Switching to a (if you have a regular savings account) is a no-brainer. And now is a perfect time to do it.

“As consumers, we’ve enjoyed low interest rates for many years,” says Farron Daggs, CFP, founder and CEO of Harrison Wallace Financial Group. “However, now that interest rates have risen, we can also take advantage of the higher interest rates that high-yield savings accounts are offering. In the low interest rate environment, we were earning nothing on our cash accounts. , and now we are finally making reasonable rates on our passive cash accounts. can earn interest, so it only makes sense to open a high-yield savings account.”

Ready to open a high-yield savings account? Start here!