How much can you earn with a 5% savings APY?
It's no secret that today's high interest rates offer big benefits to savers. While traditional savings accounts may still earn only 0.42% APY on average, high-yield savings accounts from online banks can offer more than 10 times that much.
But among the best high-yield savings accounts, some can earn as much as 5% APY right now. Even just a few short months ago, rates that high were reserved for certificates of deposit (CDs) with much less flexible terms. While CDs can be a great resource today, the ability to earn 5% APY with high-yield savings can make it even easier for savers to reach their goals and maintain access to their cash over time.
If you're new to saving, or never really tracked interest rates closely before, it may be difficult to understand how big a difference 5% APY can make in your savings plan. To help illustrate, we've done the math to show how much you can get with a 5% savings interest rate.
Start comparing today's savings rates here.
How much can you earn with a 5% savings APY?
Scoring a 5% APY on your high-yield savings account can result in a huge increase to your savings balance over time. But how much exactly can you earn? Here are a few examples:
$5,000 deposit
To start, let's say you currently have $5,000 sitting in your savings account that you plan to transfer to a 5% APY high-yield account. To focus on other financial goals, you decide not to make additional contributions.
Assuming your APY remains the same, you could increase your balance in one year to a total $5,250 — just by letting the initial deposit sit in your new account and accrue interest.
Find high-earning savings account rates you can qualify for today!
$5,000 deposit, $200 monthly contribution
Maybe you have the same $5,000 initial deposit, but you also decide — based on your budget and spending plan — that you can afford to contribute an additional $200 to your savings each month.
Over the course of a year earning compounding 5% interest, you would have a total balance of around $7,704. That includes $2,400 in added contributions you made and over $300 in interest you earned. You can see how adding money to your account can help you earn even more from your 5% rate — even if you start with the same balance.
$10,000 deposit, saved for two years
Keeping your savings in your account longer can also add to the interest you earn. Consider a higher starting balance of $10,000 that you're planning to use for a specific purchase, but you have two years before you'll need it.
It's impossible to predict exactly what savings rates could do over that time period, but let's say interest rates remain around 5% over that time. Two years after your initial deposit — and with no contributions — you could grow your balance by around $1,025 for a total savings of $11,025.
How to find a great savings account today
If you're looking to earn 5% APY on your savings, you should start with a high-yield savings account. These accounts are typically offered by online banks with fewer overhead costs than the large national bank chains that tend to have only low-earning traditional savings.
But while interest rate is important, it's not the only consideration you might have. Account details like monthly fees, minimum deposit or balance requirements, how you access your account, transfer limits and more can affect how useful your account is in helping you reach your savings goals. Further, there are some added benefits you may want to look for — including online tools and features, potential bonuses and additional ways to access your balance (like debit cards).
Compare saving options with great interest rates today.
The bottom line
Now is a great time to save — and using a high-yield savings account can help you boost your balance while keeping your balance available when you need it. Today, it's possible to earn as much as 5% APY on your savings — which can help you gain hundreds of additional dollars in interest depending on your balance and timeline. But always make sure to compare different savings options to find the right account for your goals.
