It's crucial to have savings on hand for life’s unexpected expenses. A healthy emergency fund can save you from going into debt, especially if you contribute to it monthly. One easy way to build your savings is by putting it in a high-yield savings account.
High-yield savings accounts are different from traditional savings accounts because they typically have interest rates at least 10 times higher than the national average. HYSA interest compounds on a regular basis, which helps your money grow without any action on your part. Using compound interest to your advantage is one of the secrets expert savers use to reach their goals faster. And it can make a real difference in your bottom line over a year.
Here's how much you'll earn in a year by depositing $500 into a high-yield savings account each month
Here’s how much you can expect to earn using an HYSA over one year if you deposit $500 each month. This scenario assumes that interest is compounded monthly, but some high-yield savings accounts compound daily.
| APY | Interest earned after 1 year | Balance after 1 year | |
| Traditional savings account | 0.45% | $12.39 | $6,012.39 |
| High-yield savings account | 5.00% | $139.43 | $6,139.43 |
Traditional savings account rate based on national average APY as of May 24, 2024. Source: FDIC.
Note that there are plenty of high-yield savings accounts paying over 5% APY, or annual percentage yield, so you could earn even more than this example. You can use a savings interest calculator to figure out how much you can earn over a specific period with the account you're considering.
Don't have $500 to save each month? Here's how much you can earn with smaller deposits
You may not be able to set aside $500 per month, but that doesn’t mean you should ditch your savings goals. With savings, every little bit counts, and depositing even a small amount each month adds up over time. You can also use multiple savings strategies at once to supercharge your savings.
Here's how much you could earn with lower monthly deposit amounts in a high-yield savings account with 5% APY, assuming interest is compounded monthly.
| Monthly deposit | Interest earned after 1 year | Balance after 1 year |
| $25 | $6.97 | $306.97 |
| $50 | $13.94 | $613.94 |
| $100 | $27.89 | $1,227.89 |
| $500 | $139.43 | $6,139.43 |
How to choose the right high-yield savings account for you
Finding an HYSA with a competitive rate is important, but it’s not the only factor to look at. Consider all the features an account offers -- or doesn’t offer -- before you decide on a high-yield savings account. Factors to weigh include:
- Minimum deposit requirements: Some high-yield savings accounts require a minimum initial deposit to open the account. This could be anywhere from $10 to $500. However, there are many HYSAs with a $0 minimum deposit requirement.
- Minimum balance requirements: Some HYSAs require you to keep a minimum amount in your account each month. If you don't, you could incur fees. If you don't think you can maintain a high enough balance to meet an account's requirements, look elsewhere.
- Fees: Some high-yield savings accounts come with fees, such as monthly maintenance or overdraft fees. These can eat into your interest earnings. Look for a no-fee HYSA to maximize your earnings.
- Branch access: Some of the top-earning HYSAs are offered by online banks, so you won't have access to a physical branch. If in-person service is important to you, look for HYSAs with a physical location near you.
- ATM access: Many online-only HYSAs offer easy ATM access, but some do not. If you need ATM access, look for banks that have ATM networks or offer reimbursement for out-of-network ATM fees.
- Withdrawal limits: Consider how often you'll want access to your funds. Some accounts allow only a certain number of monthly withdrawals or transfers before incurring an excessive withdrawal fee.
- Federal deposit insurance: HYSAs at FDIC-insured banks and NCUA-insured credit unions are federally protected for up to $250,000 per person, per institution. That means your money is safe even if the bank fails.
- Customer reviews: When you're comparing high-yield savings accounts, reading customer reviews can help you decide on one. Consider things like app reviews, customer service reviews and general customer satisfaction ratings. You can also look for common complaints on sites like Trustpilot to see if there are any themes that might make or break your decision.
