What to know about high-yield savings accounts

When it comes to growing your wealth, every penny counts — and that’s especially true right now, as inflation is causing a serious dent in many people’s budgets. If you want to help your money grow, it’s crucial to make the most of your savings, which you can do with the help of a high-yield savings account. 

A high-yield savings account, or HYSA, is a type of savings account that offers a higher interest rate than a regular savings account. These financial instruments offer the opportunity to earn more on your hard-earned money while providing the security and accessibility you need. Below, we’ll delve into the ins and outs of high-yield savings accounts to explore what you need to know and why they should be on your radar. 

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What to know about high-yield savings accounts

Here are four things every saver should know about a high-yield savings account.

You can earn a higher interest rate with a high-yield account

The primary advantage of high-yield savings accounts is the ability to earn more interest on your money to help your money grow faster and potentially outpace inflation. Some high-yield savings accounts are offering interest rates of 4.5% or higher. In comparison, the national average savings account interest rate was just 0.53% as of July 10, 2023. 

See exactly how much more you could be earning with a high-yield savings account here now.

There may be minimum balance requirements

While the benefits are typically enough to outweigh the potential downsides, it’s worth noting that some high-yield savings accounts require a minimum balance to open an account or earn the advertised interest rate. These minimums can vary, of course, but you should still make sure to consider this factor when choosing the right account for your needs.

You can still access your money

Unlike longer term investment options, like certificates of deposit (CDs), which make it difficult or expensive to withdraw your money earlier than expected, a high-yield savings account allows for easy access to your money. 

While the terms and conditions vary by financial institution, you can usually withdraw funds whenever you need them without penalties or restrictions through online and mobile banking, ATM access, or account transfers. 

There are no or minimal fees associated with high-yield savings accounts

You typically aren’t paying more for the benefits you get with a high-yield savings account, either. Many high-yield savings accounts come with few to no associated fees, as long as you meet the terms and conditions of the account. This ensures that more of your money goes toward earning interest rather than being eaten away by excess charges.

Find out how much you could be earning with a high-yield savings account now.

When to use high-yield savings accounts

If you can meet the minimum requirements for a high-yield savings account, it may be worth considering for the following purposes:

• Emergency fund: Unforeseen expenses such as medical bills, car repairs or unexpected job loss can wreak havoc on your finances. A high-yield savings account is an ideal place to stash your emergency fund because it offers a high growth potential and easy accessibility when you need it. 
• Shorter-term savings goals: Whether you’re planning a dream vacation, saving for a down payment on a house, or preparing for a wedding, short-term savings goals require a balance between accessibility and growth. High-yield savings accounts offer an easy way to meet those goals.
• Irregular expenses: Certain expenses occur irregularly throughout the year, making it challenging to budget for them. By using a high-yield savings account, you can set aside money for these irregular expenses over time, ensuring that you’re financially prepared when they arise. 
• Alternative to traditional savings accounts: If you’re still relying on a regular savings account with a low interest rate, it may be time to consider upgrading to a high-yield savings account. With interest rates on traditional savings accounts barely keeping pace with inflation, you may be losing purchasing power. 
• Opportunity fund: Unique investment opportunities or offers can arise and require a lump sum of money, and having an opportunity fund lets you jump on these opportunities without disturbing your other accounts. A high-yield savings account provides an excellent option for this type of fund.

The bottom line

High-yield savings accounts can be a powerful tool to make the most of your savings. By providing higher interest rates, safety, and flexibility, these accounts can also be a crucial component of your overall financial strategy. 

But before you sign on the dotted line, remember to compare rates, consider account requirements, and leverage the accessibility offered by these accounts. With some research and careful planning, a high-yield savings account can help your money grow and pave the way for a financially secure future.