High Yield Savings Accounts 101

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If you don’t already have a high yield savings account, you are missing out! Did you know that the average interest rate on a regular savings account is just .06%? That means for every $1,000 you put in savings you’re earning just 6 cents, which is practically nothing.

But, what if I told you there was another option for your savings account, where you could earn significantly more interest without any additional risk? It’s called a high-yield savings account, and it’s a secret weapon to maximizing wealth as fast as possible.

What is a high-yield savings account?

A high-yield (HY) savings account is simply just a savings account that pays a higher yield, aka a higher interest rate. It’s a great vehicle for saving money because you can earn a significantly more money for using this type of account compared to a regular savings account. Many banks offer a high-yield option, so it can be pretty easy to set one up with your current bank. However, if your bank doesn’t have  a HY option, you can open one with a different institution, as long as they allow for transferring funds.

What are high-yield savings accounts used for?

HY accounts are great to use for short-term savings goals. They are a safe option compared to investing in the stock market, because there is no risk of losing money. With a HY account, the yield, also called APY (annual percentage yield), is set at a certain rate. The bank does have the discretion to change this rate, but there is no risk to losing money. With a regular investment, there is always a chance that the value of your investments can go below zero due to market fluctuations. 

I use my HY savings account for my emergency savings and for the money I am saving for a down payment. This way, I know that the money is always safe and growing, and I don’t have to worry about losing money in the short term compared to if I had it invested in the stock market. 

How to choose the right account for you

There are so many high-yield savings accounts to choose from, so it can be super hard to figure out which is the right one or even what to look for. Here are the major points to keep your eye out for when it comes to choosing a HY account:

Interest rate

This is also called Annual percentage Yield (APY), and is the main point of attraction for high yield accounts. For most accounts, you will likely see APYs in the range of .75-2.0%. Generally, the higher rates require minimum balances, so to earn rates closer to 2% you need to make sure you can maintain the balance requirements. 

Required Initial Deposit

As mentioned above, many HY accounts that pay out higher APYs require higher balances. Many also have a minimum balance, meaning that you need to have a certain amount of money to even open an account. However, this isn’t true for all, so if you don’t have a lot of money to deposit there are still plenty of options to choose from.


Many banks do not charge fees for HY accounts, but some do. There are too many fee-free options to really justify paying a fee for one, so be sure to read the fine print and make sure there are no annual fees. Also pay attention to transfer/withdrawal fees because many banks have restrictions on many transfers you can make per month for free.

Links to other banks

This is important to pay attention to; if your HY account isn’t with your current bank, you need to make sure that it allows transfers from other institutions. This way, you can connect your checking account and make direct transfers into your savings account. 

FDIC Insurance

Most HY accounts are FDIC insured, meaning that they are protected by the federal government and your money is insured if the bank goes under. This is critical; if it isn’t FDIC insured steer clear!

In Closing

HY Savings accounts are an excellent tool to use for short-term savings, especially for emergency funds. In fact, after learning about high-yield accounts, all of my clients have opened one and used it as an emergency fund. There really are no downsides because there is no risk and you’d be setting money aside for savings anyways. Why not earn the higher rate? For reference, I use the Capital One 360 Savings and I love it! It is super easy to use, the guidelines are crystal clear, and their user experience/ customer service is great. 

Before choosing your own high yield account, make sure you do your research on all the options available to you, and pick one that aligns with your current and long-term financial goals.

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