Is a $10,000 deposit into a high-yield savings account worth it?
Amid today's significantly cooled but still stubborn inflation and a federal funds rate stuck at its highest level since 2001, many Americans are understandably looking for ways to grow and protect their money. While regular savings accounts can suffice, the returns on these accounts are negligible and fail to keep pace with the inflation rate. This can lead many to explore the benefits of high-yield savings accounts, which operate like traditional savings accounts but with a much higher return.
To earn this significant return, however, savers will need to feel comfortable making a substantive deposit. For some, this could be as high as $10,000 or more. But is a $10,000 deposit into a high-yield savings account worth it, or will savers be better served by exploring the alternatives? That's what we will break down below.
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Is a $10,000 deposit into a high-yield savings account worth it?
A deposit of $10,000 into a new high-yield savings account can be worth it for multiple reasons in today's economy. Here are three major benefits:
- Higher rates: Rates on high-yield savings accounts are approaching 5% right now. That's equivalent to an extra $500 earned on a $10,000 deposit over one year, simply made by transferring funds from a regular account into a high-yield one.
- The alternatives aren't as advantageous: CDs offer slightly higher rates than high-yield savings accounts but savers will need to leave their money untouched in the CD until it's matured to earn that return. And regular savings accounts have an average interest rate of just 0.46% right now, which equates to just $46 earned on a $10,000 deposit in one year.
- You won't lose flexibility: High-yield savings accounts won't limit your flexibility. Unlike CDs, for example, you'll still be able to withdraw funds or add additional ones as needed. This is vital when depositing a five-figure amount of money. And in an economy still reeling from this cycle of inflation, this accessibility can be key for many.
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Other considerations
Like any financial transaction, there are some other considerations to account for when making a $10,000 deposit into a high-yield savings account. This includes:
- The rate could change: High-yield savings accounts come with variable rates which can change often. So while the prospect of earning a substantial return on a $10,000 deposit is high right now, it may not be as easy to earn if rates on these accounts adjust downward.
- CD rates are higher: If you're looking to earn the highest rate possible, CDs are the better alternative. While high-yield savings account rates are competitive, the best CDs are often over 5% now and approaching 6% for some, which could add up to big returns on a $10,000 CD.
- The best banks are online: The best banks for high-yield savings accounts, as in the ones that offer the highest rates, are typically found online — not with local branches that you can visit in person. While this may not be a disqualifier for many, it can be for others who prefer the ease of access to their funds, especially when there's $10,000 or more in the account.
The bottom line
High-yield savings accounts can be worthwhile tools for millions of Americans right now, particularly for those willing to make a $10,000 deposit or more into one of these accounts. With the ability to earn a substantial return thanks to high rates (higher than many alternatives) and flexible use, high-yield savings accounts make sense for those looking to earn more interest right now. But it's important to remember that rates on these accounts can change, CD rates are generally higher and the banks offering the best high-yield savings rates are often found online (not with in-person local branches). Those considerations could easily be outweighed by the big benefits a high-yield savings account can offer now, however, particularly when depositing $10,000 to open the account.
