Don't have a high-yield savings account? Here's how you're losing money

Building savings is Personal Finance 101. Even as small children, many of us are taught to save our change in a piggy bank, and for good reason. No matter how confident you are in your financial plan, any number of things could disrupt it, from sudden illness to job loss. Having healthy savings makes it easier to weather these setbacks. A savings account can also help you put aside money for a specific goal, such as a wedding or a new car.

However, not all savings accounts are created equal. If you don't put your money in the right kind of account, you could miss out on the opportunity to grow that money faster.

According to Bankrate's 2023 Online Savings Survey, only 1 in 5 Americans with savings accounts earn 3% or higher. Almost a quarter of those savers earn less than 1%, while 16% earn no interest at all. That's downright paltry compared to the best high-yield savings accounts, which can offer as much at 5% or higher, depending on the rate environment.

In other words, a whopping 80% of savers are passing up what is essentially free money. Here's why — and how you can earn more if you're one of them.

Check out current savings rates here to find out how much more you could earn with a high-yield account.

How you're missing out by not having a high-yield savings account

There's a reason high-yield savings accounts are called "high-yield." They earn more interest than regular savings accounts. And by "more," we mean "considerably more."

Currently, the average APY (annual percentage yield) for regular savings accounts is 0.39%, according to FDIC data. High-yield accounts, on the other hand, have APYs of about 3.5% to 4.5% (or higher).

What does that difference look like for your savings? Let's say you have $1,000 to put away. In a regular savings account at 0.39%, you'd earn $3.90 interest in 12 months. By contrast, in a high-yield savings account at 4.5%, you'd earn $45.

The more you save, and the longer you keep it in the account, the bigger that difference gets, without any extra effort on your part. That's a compelling reason to open a high-yield savings account today.

"Considering where interest rates are today, it's a great time to take advantage and start earning additional returns," says William Bevins, CFP, CTFA. "Every additional dollar helps."

Start exploring high-yield savings accounts by reviewing current rates online now.

What to look for in a high-yield savings account

There are lots of high-yield savings accounts to choose from. To find the best one for you, look for these things:

• Highest rate: High-yield savings will always outperform regular ones, but how much yours outperforms them depends on the account. Take the time to compare your options and, all other things being equal, go for the account with the highest APY.
• Fees: Because high-yield savings accounts are often provided by online banks, they tend to have lower fees than those from brick-and-mortar banks with more overhead costs. This often means you enjoy lower fees or no fees at all. Read the terms and conditions for any account you're considering to see what fees you might incur.
• Minimum balance requirements: Some accounts may require you to deposit a certain amount to open an account or maintain a certain balance to avoid fees. Look for accounts with low requirements to keep as much of your money as possible.
• Federal deposit insurance: While many banks and credit unions are FDIC- or NCUA-insured, you should still double-check before opening an account with any institution. If the institution is insured, your deposits will be protected up to $250,000 per account if it fails. If it's not, you could lose your savings.

The bottom line

Whether you're building an emergency fund or saving for a specific goal, opening a high-yield savings account (or switching to one if you have a regular savings account) is a no-brainer. And now is a perfect time to do so.

"As consumers, we have enjoyed low interest rates for many years," says Faron Daugs, CFP, founder and CEO of Harrison Wallace Financial Group. "However, now that interest rates have gone up, we may as well take advantage of the higher interest rates that the high-yield savings accounts are offering. In the low-interest rate environment, we were earning next to nothing on our cash accounts, and now we finally can earn a reasonable rate of interest on our idle cash accounts, so it only makes sense to open a high-yield savings account."

Ready to open a high-yield savings account? Get started here!