With inflation still persistent but cooler than it has been, and higher interest rates making borrowing significantly more expensive, many adults may feel like they have limited economic options. But with higher rates on credit cards and mortgages come higher interest rates on traditional savings accounts, too.
Rates on high-yield savings and certificates of deposit (CD) accounts, in particular, have risen exponentially. These accounts are offering more interest than what you can secure with regular accounts, and many are beating the rate of inflation, making them a reliable bet in an otherwise uneven economic environment.
To get the most out of these accounts, however, savers need to shop around to find the best one for their needs. This includes accounts with high rates and little (or no) fees. They also need to deposit the right amount at the right time to truly reap the rewards. For many, a $5,000 deposit into a high-yield savings account could be the perfect starting amount.
Explore your high-yield savings account options nowand begin earning more interest.
Why you should deposit $5,000 into a high-yield savings account
Timing is everything, particularly when it comes to savings. While rates on high-yield savings accounts were negligible in 2020 and 2021, they’ve risen significantly in recent months, making them a great way to earn more money. And there are compelling reasons to open one now. Here are three to know.
Rates are high
While not as high as some short-term CD options, interest rates on high-yield savings accounts are very competitive. It’s not difficult to find an account that offers 4.5% to 5.5% APY or more, especially if you’re willing to use an online bank or lender.
A $5,000 deposit into an account with the latter interest rate would grow to $5,225 after 12 months, not accounting for compound interest or any additional rate hikes. And all you need to do is transfer that amount from your regular account into a high-yield one. You’ll still be able to access the money as you’re accustomed to, all while it grows at a higher rate.
Rates could be going higher
High-yield savings accounts have variable interest rates, meaning they can and will change without notice, sometimes at a quick cadence. And while an interest rate hike courtesy of the Federal Reserve is unlikely for September, it could be coming later this year, especially if inflation remains higher than desired.
But you won’t be able to take advantage of those increases if your money is sitting in a regular account. A $5,000 deposit into a high-yield account this month will allow you to immediately start earning interest at a higher rate while also best positioning your money for additional rate hikes to come. Don’t lose out on earnings to be made now – and more to be made before the year is out.
You’re (likely) losing money
Interest rates on regular savings accounts are minimal as of mid-September 2023. With the average rate just 0.43% on these accounts, you’re likely losing money by keeping your money in a regular account instead of in a high-yield savings account or CD (or both).
Using the $5,000 figure for a regular savings account over those same 12 months, you’ll have grown your bottom line by just $21.50. So you’re losing out on more than $200 extra each year by keeping your money untouched. Instead, move $5,000 into a high-yield account and make up those lost funds now.
The bottom line
Higher interest rates can hamper your personal finances, so do your best to limit the pain as much as possible. High-yield savings accounts are one way to do so. By making a $5,000 deposit into one of these accounts now, you’ll immediately start earning more interest on your savings. But you’ll also be in a prime position to earn more if rates go up yet again later in 2023.
And, if you’re still unsure, simply crunch the numbers and compare what you could be making with a high-yield account versus what you’ve already made this year with your regular account. From there, shop around for high-yield savings accountsand start earning more money today!