Your Savings Deserves Better Than a Measly 0.02% APY. Here's How to Stop Settling for Less

If you still have money sitting in a traditional savings account linked to your checking account, you're probably earning less than 1% in interest. That's pennies on your hard-earned cash. 

For years, I let my money sit in a traditional savings account because I figured it was the easiest way to access my money. I didn't think about how higher interest rates could boost my savings. 

There's a far more rewarding account to park your savings, and I'm glad I found it: a high-yield savings account. 

Since switching to a high-yield savings account at an online-only bank, I've been earning more than 3% interest (even above 4% for a while) on my balance. It hasn't made me rich, but it's been the safest and easiest way to earn a little extra. 

Why you're missing out on earning more on your savings 

Earning around 4% APY on your savings may not seem like a lot. But let's do the math. 

If you have $5,000 in a traditional savings account with a 0.02% APY, you'll earn one dollar after a year. If you instead deposit $5,000 into a high-yield savings account with a 4% APY, you'll earn an extra $200 after a year. 

High-yield savings rates have been relatively strong for the last few years as the Federal Reserve has kept its benchmark interest rate elevated. But APYs are variable, so they can change at any time. 

Stashing your money in a high-yield savings account isn't meant to be a long-term investment strategy or a quick fix for the higher cost of living. Still, it's a better holding spot for your money than a checking or traditional savings account. 

Read more: Struggling to Save? This Expert Tip Can Boost Your Savings Even if Money Is Tight

What to know before switching savings accounts

If you're unsure about safely moving your money from a brick-and-mortar bank to an online-only high-yield savings account, take some time to reconsider. There are plenty of reasons to switch banks. You can always find a more rewarding account than your current one. 

Changing banks isn't time-consuming. Setting up high-yield savings accounts only takes a few minutes, and transferring money takes a few days at most. 

Banks that are FDIC-insured protect your money, up to $250,000 per account, in case of bank failure. Regardless, you'll still need to use online safety features, like two-factor authentication, to help keep your money and personal data safe. 

I recommend researching bank and account features and thinking about which ones matter most to you. Do you prefer to have ATM access to pull cash from your savings account? Do you need certain app features to keep your money goals organized? 

Remember to check for monthly fees. If you're paying money to maintain an account, it will cut into your savings. 

In the end, you don't need to get the absolute highest savings rate possible. What's important is that you're happy where you're stashing your savings.