If you’ve been following me for a while, you know I’m always looking for ways to make my money work a little harder. One of the easiest changes I made was moving part of my savings into a high-yield savings account (HYSA). I kept hearing people talk about earning real interest instead of letting their money sit in a regular savings account, so I finally looked into it, and honestly, I wish I’d done it sooner.
What Is a High-Yield Savings Account?
A high-yield savings account works much like a traditional savings account. You deposit money and can withdraw it whenever you need it, but it typically pays a meaningfully higher interest rate. While many traditional savings accounts pay close to nothing, high-yield accounts, often offered by online banks, can pay several times the national average, letting your savings actually grow while it just sits there.
Why I Like Them
- Higher interest than many traditional savings accounts, which means your money grows faster without you doing anything differently.
- Easy access to your money. Unlike a CD or an investment account, you’re not locking your money away for a set term.
- Great for emergency funds, since it keeps the money separate from everyday spending while still earning something.
- No investing experience required. It works exactly like the savings account you already know how to use.
Are They Safe?
Many HYSAs are offered by FDIC-insured banks or NCUA-insured credit unions, meaning deposits are generally protected up to applicable limits, the same protection your money would have at a traditional bank. Before opening one, it’s worth confirming that the specific bank or credit union is FDIC- or NCUA-insured.
Frequently Asked Questions
Is there a downside to a high-yield savings account?
Rates can change over time since they’re variable, and some accounts are only available online, without physical branches. For most people, that’s a minor tradeoff for the higher return.
How much of my savings should I move into one?
Many people start by moving their emergency fund, since it’s money you want to keep accessible but aren’t spending day to day.
Do I need a minimum balance to open one?
It depends on the bank. Many online high-yield accounts have low or no minimum balance requirements, but it’s worth checking before you open one.
Once your emergency fund is earning its keep, check out a few more habits in my 10 simple ways I save money and my guide to automating your savings, and take two minutes to run the settlement quiz to see if you’re owed money you didn’t know about.
