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So you’re working on building up your savings account? Great job! Having savings is important and it can increase your peace-of-mind significantly. Your savings account should be earning you interest. Did you know that the average APY (Annual Percentage Yield, aka interest) on a traditional, brick-and-mortar bank account is a measly 0.06%? To be honest, that sucks! You can make way more than that if you keep your savings in one of the high yield savings accounts I’m sharing today!
Let me give you a quick example of why this matters. If you have $10,000 to put into a savings account, and it’s earning .06% per year in interest, you’ll earn $6 per year. At the end of the year, you’ll have $10,006. Now let’s say you saved your $10,000 into a high yield savings account that earns 1.10% interest. At the end of the year, you’ll have earned $110. You’ll have $10,110.
If you aren’t banking with an institution that offers a high yield savings account, you are losing money! Let’s look a little closer at what HYSA’s are, how they work, and how to find the best one for you.
The worst part about not taking full advantage of a high yield savings account (HYSA) is that it is the easiest money you will ever make. All you have to do is deposit money into an account and reap the benefits of compounding interest, or what Albert Einstein referred to as the 8th wonder of the world.
What is a High Yield Savings Account?
A high yield savings account is just like your traditional bank savings account, except a HYSA offers a higher rate of return on deposited money due to the higher interest rates offered. These rates are not permanent and fluctuate with “the market,” or the Federal Reserve.
For example, last year Ally’s HYSA interest rate peaked at 2.20%. Since 2019, we have had several drastic changes to the market, therefore interest rates are currently sitting at 1.10% with Ally.
It’s important to note that most HYSAs are found on online banks and not traditional brick-and-mortar locations. Why? Brick-and-mortar banks have a high operating cost and overhead financial obligations, whereas online banks don’t. Online banks have the option to pass what they save on those typical business costs to you, the customer.
Why Do You Need a HYSA?
More often than not, no matter how much these HYSA APY’s drop across the board, you will earn more than the average 0.06% rate at traditional banks.
In most cases, you’ll earn around 17 times more than the national average. This is exactly why you need a HYSA. It’s a chance to make more money with ease and little to no stress.
Below is a chart comparing what you would make in one year, three years and five years at a traditional savings rate versus what you would make in the same allotted time with a HYSA with an initial deposit on $1,000. It is a wonderful visual aid to remind you of why choosing a HYSA is the best option.
| APY | Year One | Year Three | Year Five |
| 0.06% | 1,000.60 | $1,001.80 | 1,003.00 |
| 1.10% | 1,011.06 (+11) | $1,033.53(+31.73) | $1,056.51(+53.51) |
Now, to really hit home the power of compound interest, let’s take the same initial deposit and add $100 a month to it over one year, three years and five years.
| APY | Year One | Year Three | Year Five |
| 0.06% | 2,200.93 | 4,604.95 | $7,011.86 |
| 1.10% | 2,217.12(+16.19) | $4,691.89(+86.94) | 7,221.68(+209.82) |
One more, for the road. Let’s take the same initial deposit and add $400 a month to it over one year, three years and five years.
| APY | Year One | Year Three | Year Five |
| 0.06% | $5,801.92 | $15,414.41 | 25,038.44 |
| 1.10% | $5,835.33(+33.41) | $15,666.95(+252.54) | 25,717.17(+678.73) |
In just 5 years you’ve made almost $700 more dollars than you would in a traditional savings account. Just for sticking your money in an account that gives you greater return!
If you like playing with numbers like me, check out this APY calculator!
Things to Consider When Shopping for a HYSA
Since these are online banks and we live in the world on hacking and information sabotage, it’s imperative to make sure that the HYSA you choose is FDIC insured. When a bank is FDIC insured it means that in the event of a bank failure the Federal Deposit Insurance Corporation (FDIC), an independent federal agency, is responsible for protecting customer assets.
I would also recommend having a traditional brick and mortar bank account in addition to your online savings account, as getting cash into and out of online banks can be a challenge that has additional fees (ATM fees) depending on the banking institution.
Also, be cautious about any requirements or restrictions your HYSA may have. Some institutions require you have another investing account open with them, high minimums to maintain the account, or high initial deposit amounts.
Just like with anything personal finance and banking related, do your due diligence before jumping in!
The Top 5 Best High Yield Savings Accounts Available That I Recommend:
| BANK | APY | FDIC INSURED | MINIMUM DEPOSIT | COMPOUND INTEREST | FEES |
| CIT BANK | 1.01% | YES | $100 initial deposit + $100 monthly deposits | Daily | No account opening or maintenance fees |
| ALLY | 1.10% | YES | NO | Daily | No monthly maintenance fees or minimum balance requirements |
| CAPITAL 360 | 1.00% | YES | NO | Monthly | No monthly maintenance fees or minimum balance requirements |
| BARCLAYS | 1.00% | YES | NO | Daily | No monthly maintenance fees or minimum balance requirements |
| AXOS | 1.30% | YES | $250 Initial deposit | Daily | No monthly maintenance fees or minimum balance requirements |
High yield savings accounts are too good to not take advantage of. Each of these banks offers additional tools and services, along with savings accounts that clock in at about 15-17% more than the national average.
In other words, get to clickin’ and open a HYSA today!
Did you enjoy this list of the top 5 best high yield savings accounts that I mentioned? Let me know in the comments below!
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2 Responses
This may be a stupid question, but is a high yielding cd is a Hysa? or is a regular saving account considered a Hysa?
A high hield CD could be considered a HYSA, but a regular savings account typically *isnt* because the interest they return is so low e.g. .05%. HYSA is just a generalized term for any savings account that has higher returns than average, so it could be a variety of things, anything above .5%, a lot of them are .8%-1.5% APY! Many have dropped their rates recently, but if it’s higher than the national average (.05% APY) it would be considered high yield :).