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By Kelly Ernst
Edited By Angelica Leicht
/ CBS News
Saving money is crucial for your financial stability, whether it's for a rainy day, a big purchase or in case of an emergency. And one of the easiest ways to grow your savings faster is by depositing it in a high-yield savings account.
High-yield savings accounts, as the name suggests, offer much higher interest rates than traditional savings accounts. The average rate for a regular savings account is currently 0.42%, according to the FDIC. Rates for high-yield savings accounts, on the other hand, are as high as 5.05% per Bankrate. That's more than 10 times higher.
However, not all high-yield savings accounts are created equal, and finding the one with the best rate can earn you significantly more interest over time. Just how much more? Let's take a closer look.
See today's top savings rates here.
How much can you make by depositing $10,000 into a high-yield savings account?
The more money you deposit, the more interest you'll earn. If you have $10,000 to invest, here's what your earnings would be at different interest rates:
- After one year with a regular account at 0.42%: $10,042.00
- After one year with a high-yield account at 4.50%: $10,450.00
- After one year with a high-yield account at 5.00%: $10,500.00
That said, you can deposit less than $10,000 and still reap the benefits of a high-yield savings account. For example, here's how much you would make by depositing $5,000 instead:
- After one year with a regular account at 0.42%: $5,021.00
- After one year with a high-yield account at 4.50%: $5,225.00
- After one year with a high-yield account at 5.00%: $5,250.00
No matter how much you have to deposit, you're essentially losing out on free money if you're keeping it in a regular savings account.
Compare your savings account options online now.
Other considerations
It's important to note that savings account interest rates vary over time, and banks and credit unions are always competing for new customers. So it's worth it to check current offers occasionally to ensure your account is still delivering the best results.
Additionally, some high-yield savings accounts come with certain conditions that affect your earning potential. For example, some accounts require a minimum balance, limit the number of withdrawals you can make per month or charge monthly maintenance fees. It's important to read an account's terms and conditions before signing on the dotted line to make sure it meets your needs.
Another savings option to consider is a certificate of deposit (CD), a type of account with a fixed interest rate and a fixed term. CDs usually offer higher interest rates than high-yield savings accounts, and the rate is set when you open the account, which means it won't go down if overall interest rates drop.
That said, many CDs charge a penalty for withdrawing your funds early, so you should make sure you don't need to access your funds before the term expires.
How much can you earn? Find out by viewing current savings account offerings here.
The bottom line
Opening a high-yield savings account is an easy and effective way to boost your savings. Whether you're depositing $1,000 or $10,000, your money will grow faster in a high-yield account, and the only action you need to take is to do a little research. By choosing the account with the best rates and terms for your needs, you can ensure you're earning as much interest as possible.
