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More people are finding ways to make their savings work harder, and high-yield savings accounts are one of the most accessible tools available.
For those seeking a savvy method for earning more cents on each dollar, a high-yield savings account offers an alternative to the low interest rates that traditional banks offer.
Originally published: September 19, 2024
High-yield savings accounts, typically offered by online banks and credit unions, provide a significantly higher interest rate than traditional banks. While traditional banks, such as Wells Fargo or Chase, offer interest rates around 0.01% or 0.02% APY, high-yield accounts offer rates upward of 4.00% APY. Rates are subject to change and may vary by institution.
While high-yield accounts have their merit, they may not be for everyone. Many banks offering an impressive APY are fully online, meaning there are no brick-and-mortar stores available. This may be worth considering if you prefer a personalized touch to your banking experience.
However, for many, the benefits of a high-yield account outweigh the potential insecurity of online banking.
For those looking to make their money work for them through interest, a high-yield account offers both flexibility and excellent returns without the fees or length required of long-term investments. We believe this makes it a perfect option for sinking funds or emergency funds.
There's a reason high-yield savings accounts are growing in popularity. With an attractive APY, minimal requirements for opening an account, and an abundance of options available for consumers, there are many reasons to choose a high-yield account for your savings.
While investment options such as ETFs or mutual funds can offer a greater return through the power of compound interest, many of these methods win over the long term. The time required makes those methods ideal for those who don't intend to withdraw the money for a handful of years, or even until retirement.
Alternatively, high-yield savings accounts are liquid, meaning you can withdraw your money as you desire without incurring penalties. Of course, the greater your savings balance is, the greater your interest return will be.
CDs or Certificates of Deposits are another conservative approach to earning higher interest than traditional savings accounts. Unlike high-yield accounts, funds deposited into a CD cannot be touched for a specified time without a penalty. The APY for CDs often varies by bank/credit union, amount of funds deposited, and the chosen length of time for it to mature. Both tools work best as part of a broader retirement savings strategy.
A high-yield savings account (HYSA) is a deposit account that pays a higher annual percentage yield (APY) than a traditional savings account. HYSAs are most commonly offered by online banks and credit unions. Deposits at FDIC-member institutions are insured up to $250,000 per depositor, per institution, per ownership category. The FDIC maintains a BankFind tool at FDIC.gov to confirm whether a specific institution is FDIC-insured.
Deposits at FDIC-member banks are insured up to $250,000 per depositor, per institution, per ownership category. This insurance covers checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. The FDIC website maintains an updated list of insured institutions and a deposit insurance estimator.
A high-yield savings account allows withdrawals at any time, though some institutions limit the number of monthly withdrawals. A certificate of deposit (CD) holds funds for a fixed term, typically ranging from three months to five years, and early withdrawal generally incurs a penalty. CD rates are typically fixed for the full term, while HYSA rates are variable and can change with market conditions. Both options are covered by FDIC insurance at participating institutions. The Consumer Financial Protection Bureau provides an overview of both options at consumerfinance.gov.
High-yield savings accounts are commonly used for emergency funds, short-term savings goals, and cash management while earning above-average interest. The Consumer Financial Protection Bureau (CFPB) notes that liquid, interest-bearing accounts are well suited for near-term cash needs that require ready access to funds, as opposed to long-term investment accounts designed for goals that are years or decades away.
This article is for informational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional before making retirement planning decisions.
Disclosures
The information on this page is provided for educational purposes only and is not intended as investment, legal, or tax advice. It is designed solely to illustrate how longevity-linked investment benefits may work under certain assumptions. Actual results will vary. All illustrations, examples, and case studies are hypothetical and are intended to demonstrate potential scenarios — not to predict or guarantee actual outcomes. They do not represent the performance of any individual investor, portfolio, or account.
Key Assumptions Used in the Illustrations
Life expectancy and mortality projections are based on the most recent Social Security Administration (SSA) tables available at the time of simulation.
In the event of death or early withdrawal, hypothetical scenarios assume that investors who exit early, or their estate in the event of death, may receive 75% of the lesser of the initial investment or current market value, plus 1% for each full year the account was active. Case studies assume standardized market growth of 8% annually and do not incorporate unexpected market volatility, inflation, changes in interest rates, or changes in an investor's personal circumstances.
Simulations may assume a 3% annual early withdrawal rate prior to payout or death. All figures shown are net of fees. No forecast, projection, or hypothetical return should be relied upon as a promise or representation of future performance.
Past performance is not indicative of future results. The 8% annual market growth rate used in illustrations is a standardized assumption for modeling purposes only and does not represent the historical or expected performance of any specific investment. Note that early or voluntary withdrawals by other participants can affect fund performance and the size of distributions, and that a higher-than-expected number of participants reaching payout milestones may reduce the per-participant benefit received.
Savvly's Longevity Benefit is not a bank product, not FDIC insured, not insured by any federal government agency, not a guaranteed or insured investment, and not insurance. Investment values may decline.
Savvly's Longevity Benefit may not be suitable for all investors. Eligibility to invest is subject to qualification requirements and not all investors will be eligible. Investors should carefully consider their investment objectives, risk tolerance, time horizon, and financial situation before investing. See savvly.com/disclosures for current eligibility criteria, fees, risks, withdrawal terms, and fund assumptions.
This content is published by Savvly, Inc. Savvly has a financial interest in the products described and this content should not be interpreted as independent financial research or analysis. Investors should carefully evaluate their own circumstances and consult a qualified financial professional before making any investment decision.
