Saving money is an essential part of a healthy financial plan. But simply putting money aside isn’t enough. It’s equally important to choose the right account to help your money grow over time.
Interest rates on regular savings accounts are paltry, with the national average a mere 0.45%. Even with the power of compound interest, rates like that won’t help you much. Fortunately, there’s one simple thing you can do to grow your savings faster and stop missing out on earning potential.
This one move can boost your savings rate by 10 times (or more!)
High-yield savings accounts are a type of savings account that pay significantly higher rates than regular accounts. These accounts are often offered by online banks or credit unions rather than brick-and-mortar banks, which have the added cost of maintaining physical branches.
While the interest rate on high-yield savings accounts varies by institution, today’s top accounts pay up to 5.50% — more than 12 times the national average. So, the sooner you switch to a high-yield savings account, the faster your money will grow.
Other benefits of high-yield savings accounts
In addition to industry-leading interest rates, high-yield savings accounts also offer the following advantages:
Convenience: Savings accounts provided by online banks often come with robust mobile apps and websites that make it simple to manage your account from anywhere at any time.Easy access to your money: Some deposit accounts, like CDs, charge a penalty if you withdraw funds before a certain date. With a high-yield savings account, you can take out your money at any time, free of charge (as long as you mind any monthly withdrawal limits). Many online banks offer free ATM access to make it even easier.Low (or no) fees: Because they have lower overhead expenses than traditional banks, online banks often charge low or no fees on their savings accounts.Safety: High-yield savings accounts are FDIC-insured, which means your money is protected up to $250,000 per account per institution. That means if the bank or credit union fails, you won’t lose your money.
The bottom line
If you’re looking to supercharge your savings rate, opening a high-yield savings account is one of the quickest and easiest ways to do so.
“Ultimately, opening a high-yield savings account is worth considering for consumers who want to earn more money on their savings and have access to their funds when needed,” says Jamie Lima, MBA, CFP, CDFA and founder and president of Woodson Wealth Management. “With their higher interest rates, flexibility, ease of use and low-risk nature, high-yield savings accounts can be a valuable addition to any consumer’s financial toolkit.
Just be sure to do your research to find the best one for you. Compare not only interest rates but also minimum balance requirements, fees and other terms. Then, you can sit back and watch your money grow faster!