What to Know About High-Yield Savings Accounts

woman adding money to piggy bank

The idea of banking is not new and, in fact, it has been around since 1,800 BC. Ever since then, banking has become a very important factor in our everyday lives. It is hard to imagine a world in which you can’t easily deposit or take out a certain amount of money with the help of your bank. 

Everyone knows that there are checking accounts and savings accounts, but what is a high-yield savings account? How is it any different than a regular savings account? Keep reading and learn more about this unique type of account as well as the benefits it has to offer. 

What You Need to Know About High-Yield Savings Accounts

The first thing that you should know about high-yield savings accounts is that they are exactly what they sound like. They are not much more than regular savings accounts except for the fact that they come with substantially higher interest rates. Most banks offer savings accounts that only come with very low interest rates such as 0.01% or so. 

This, of course, won’t make you very much money in the long run, even if you keep your money in that account for several decades. The interest on a high-yield savings account, on the other hand, can sometimes be as much as 20 times the average amount a bank might give you. For example, some savings accounts of this type offer as much as 2% interest. 

This may not sound like a lot of money, but when you put thousands of dollars into your account, that interest rate can end up making you hundreds or even thousands of dollars. This is in comparison to regular savings accounts with interest rates of only 0.01% or even 0.1% which would only be able to make you a few dollars over the course of a year, even if you have thousands of dollars in your savings account. 

The Details

But where can you possibly find a savings account that will allow you to save money and make money in such a way? Unfortunately, most traditional banks do not offer high-yield savings accounts. Instead, you will have to do a bit of research to find the right option for you. 

Usually, only some online banks offer high-yield savings accounts. Fortunately, even if you have to do business with another bank in order to get this kind of bank account, it should still be very easy to transfer money between your different accounts. Of course, when making your choice, you will have to consider a few important financial tips to make sure you make the right choice. 

For example, you’ll need to consider any fees that may be involved as well as any requirements for initial deposits and so on. And, of course, you’ll want to see what kind of interest rates the savings account will give you. Naturally, the higher the rate is, the better. 

Once you choose a savings account, you can deposit your money and watch as the interest adds to your account throughout the year. 

The Benefits of a High-Yield Savings Account

There are many benefits of a high-yield savings account, especially when compared to a regular savings account. For one, a high-yield savings account is arguably one of the best financial tools you can possibly get your hands on. This is because it is a very easy way to make a bit of extra money. 

Depending on the interest rate on the account, you can easily make hundreds of dollars per year without needing to do anything except choose a good high-yield account. You don’t even need to put that much money into this kind of account in order to get a significant return. 

Even if you put as little as $5,000 into your account, if the interest rate is high enough, you could end up with several hundred extra dollars by the end of the year. This is not to mention if you put tens of thousands of dollars or even hundreds of thousands of dollars into your account. In that case, your savings account could easily generate thousands of dollars and you won’t even have to lift a finger. 

What You Need to Know

Besides making some extra money with a high-yield savings account, it is a great account to have as you work towards your retirement. As you put a little bit of money into this account throughout the year, the amount of money the interest rate generates for you will only increase over the years.

By the time you’re ready to retire, you’ll have a very significant amount of money in your savings account and it will only continue to grow as long as you keep some of the money in that account. 

Even if you’re not concerned about your retirement, this savings account can still be great for your current personal finances. Even though a few extra hundred dollars at the end of the year may not sound like a lot, it can be very beneficial when it comes to paying off bills and other types of debt.

Whatever the case, there are very few downsides associated with this type of savings account, especially when compared to all the benefits it has to offer.

All About High-Yield Savings Accounts

High-yield savings accounts are full of benefits and have little to no downsides. They are great because they have very high interest rates compared to a normal savings account, making it easy for you to generate plenty of extra money. 

To learn more about how it works, click here.