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If you are looking to grow your savings or emergency fund or reach a savings goal, a high-yield savings account is an excellent place to store your money while earning an above-average interest rate.
According to the FDIC, the average savings rate in the United States is 0.42% (APY), but the best high-yield savings accounts are paying much higher rates.
Sometimes the highest interest rates are available through banks you may not have heard of before, but are popular online. But if you are interested in national brands, there are a couple of those options too. Once you choose the best account for you based on the interest rate, bank features, and ease of use, here are two ways to get the most out of your high-yield savings account:
I always say the best way to save money is to "set it and forget it." It's easy to link a high-yield savings account to your checking account so you can transfer funds into it. Once this is done, you don't have to think about it, and you don't have a chance to spend the money before transferring it.
By putting transfers on autopilot, you're making saving a habit, and when you do that, you have a much greater chance of succeeding and reaching your goals.
Saving can be hard; there are so many distractions that can get in the way and derail your momentum. To stay on track, think about naming your savings account. This is a great way to stay motivated.
For example, if you're saving for a trip, give your account the name of your travel destination. If you are saving for a down payment on a home, name your account "home down payment." If I was saving to build an emergency fund, I would name the account "Jennifer's rainy day fund."
By naming the account, you will see what you are working towards in black and white — which can definitely help you stay the course towards your savings goals.
The most important thing is to get started and to realize that saving is a marathon, not a sprint. Adding a high-yield savings account to your financial picture will help to grow your money and reach your savings goals faster — especially if you automate savings so you don't have to think about it.
This article was originally published in July 2023.
