Our experts answer readers’ banking questions and write unbiased product reviews (here’s how we assess banking products). In some cases, we receive a commission from our partners; however, our opinions are our own. Terms apply to offers listed on this page.
Standard checking accounts pay little to no interest, while CDs at select financial institutions offer competitive interest rates right now.
triloks/ Getty Images
High-yield savings accounts offer much higher interest rates (APY) than traditional savings accounts.
They can be used to save for an emergency fund, travel, or major life changes.
In addition to the APY, look at the account fees, features, and convenience when deciding which to choose.
If you’re going to put your money in a savings account, you should get the most out of it.
High yield savings accounts pay more interest than a regular savings account. The average savings rate in the United States is 0.42% (APY) according to the FDIC, while the best rate on a high-yield savings account is 5.15% APY from Western Alliance Bank, powered by Raisin.
Other high rates right now include:
Popular Direct Savings: 5.05% APYSalem Five Direct eOne Savings: 5.01% APYONE Account: Up to 5.00% APY
Here are three ways to use high-yield savings accounts to grow your money and reach your savings goals:
1. Emergency fund
An emergency fund is essential right now. Lingering inflation and an uptick in layoffs makes having money saved to fall back on in case of economic upheaval crucial.
The general rule of thumb is to have three to six months of expenses saved in an emergency fund. I say that during times of economic crisis, it’s better to have nine months to a year of expenses saved. If you experience a layoff, you may not find another job quickly or at the level of income you were making in your last position.
A benefit of a high-yield savings account is that you can withdraw your money quickly if needed. If an emergency of any kind were to arise, you want to be able to access your funds without worrying about fees and penalties.
2. Trips and major purchases
You can save for expensive home goods or furniture, appliances, and even travel with a high-yield savings account. By saving for these purchases and expenses ahead of time, you can save thousands in interest that you would pay if you were to put the purchase on a credit card and be unable to pay it off.
Also, saving for a goal like a down payment on a home using a high yield savings account means the higher interest rate can help you reach that goal more quickly and risk-free. Experts don’t recommend investing money you’ll need within the next five years, and a high-yield account is a strong place to store the money you’ll need sooner.
Get Exclusive Savings with Raisin: Open a no-fee Raisin account in minutes and spread your savings across an exclusive network of over 30 FDIC-insured banks and NCUA-insured credit unions. Earn top savings rates and manage it all with a single secure login. View offers and start saving today.
3. Weddings and other life changes
Major life changes like moving or getting married can be really expensive. When I moved to New York, I could not believe how much it cost to make the move. Literally at every turn there was money being spent or a cost to be covered. Unfortunately, many people use credit cards or personal loans to cover the expense of a move or a wedding and it can take years to pay off that debt.
Instead of going into debt, plan and save for these expenses and lessen the amount you may have to borrow or put on a credit card.
What to look out for when choosing an account
While APY is probably the main driver when choosing an account, others factors to consider include bank fees, features, and ease of use. For example, some banks may have minimum deposit requirements or limits on bank lobby transactions.
The first place I would start would be the bank where I have a checking account, but you might get a higher interest rate at one of the credit unions or online banks listed above.