How much do high-yield savings accounts earn annually?
High-yield savings accounts today earn high interest rates — especially compared to pandemic-era lows just a few years ago.
The Federal Reserve's interest rate hikes to combat ongoing inflation concerns have increased interest rates on everything from loans and credit cards to savings accounts and CDs over the past year. While that can make the cost of borrowing money more expensive, it also means you can earn a lot more on the money you save.
Today, many of the top high-yield savings accounts offer upwards of 4.00% APY (annual percentage yield) while some are even inching toward 5.00%. These accounts also come with minimal fees or requirements and other features that can make them very useful for keeping your money safe while you benefit from added interest.
You can get started by exploring today's top savings account interest rates.
How much do high-yield savings accounts earn annually?
The amount you'll earn in interest with a high-yield savings account depends on the amount of money you deposit and your interest rate.
Say you have a $2,000 balance in a traditional savings account earning close to zero interest. You find a high-yield savings account with a 4.25% APY and no fees or minimums and decide to deposit your entire $2,000 balance. In a year's time, you could grow that amount to $2,085 just by moving it to the new account and letting it collect interest.
Now, say you move the original $2,000 balance to the high-yield account earning 4.25% APY, but you also decide to save more by depositing $100 into the account every month. Over a year's time, you would have a total savings balance of about $3,308. That's including your original $2,000 balance, $1,200 in contributions and about $108 of interest earned.
Learn more about how much your balance can earn and compare today's top high-yield savings account rates.
How do you earn interest with a high-yield savings account?
High-yield savings accounts earn compound interest, which is good for increasing your balance over time. Many accounts accrue interest daily or monthly.
To start, interest will grow on the balance you deposit when you open your account. But over time, your interest earnings grow as part of your overall balance. Interest accrues on your starting balance plus interest you earn and any contributions you make to the account.
Another factor that can affect how much you earn is the interest rate itself. High-yield savings accounts have variable interest rates, which means the rate offered when you open your account is not permanent. Your account's interest rate will go up and down over time due to a variety of factors (including the Fed's interest rate moves in response to inflation).
Say, for example, you had a high-yield savings account that earned about 3.5% APY last year. If you had a $5,000 balance, you would have earned about $175 over the course of the year. But this year, interest rates are higher; you may find an account with a 4.5% APY. If you deposit the same $5,000, you can earn a total of $225 in a year. That's an extra $50 in interest alone, before factoring in any additional contributions you might make.
How to choose the right savings account
The best way to get the most from your savings is to ensure that you have the right high-yield savings account for your goals.
Interest is a big factor. Compare different account options to make sure the one you choose has a competitive interest rate. Even if it doesn't remain that high forever, scoring a great interest rate today can set you up to maximize interest over time.
Other details to look for in any high-yield savings account include fees, minimum balance requirements, FDIC insurance and options for accessing your cash. Look for these account details on the bank's website or within the account terms and conditions. Taking time to compare can help you find the best account for your financial goals and keep your money safe.
Start comparing options today with some of the top savings account rates right now.
