When it comes to saving money, a regular checking account might not be the best option if you want to earn more interest while keeping your money safe.
A high-yield savings account could be a better choice. However, what counts as a high-yield account can be subjective.
According to Holley Cary, a CFP and VP, senior financial planner at First Horizon Advisors, finding an interest rate that exceeds the national average interest rate can make a significant difference in your savings growth.
The Federal Reserve has raised the federal funds rate from near zero to a range of 4.5-4.75% over the past year, prompting many banks to raise interest rates they provide to customers.
Although the national average for savings accounts sits at 0.35% as of February 2023, many financial institutions offer rates much higher than the average.
A rate of around 3.50% – 4% is competitive as of early March 2023, says Zach Novak, a CFP and lead planner at Facet.
However, interest rates can fluctuate, and you’re not locked in the way you would be with a certificate of deposit (CD).
Therefore, you may want to focus more on how a high-yield savings account at one financial institution has compared to others over time.
Apart from analyzing interest rates, you should consider what different financial institutions offer in terms of account features and policies.
Look for account costs such as maintenance, transaction, and ATM fees, and account parameters like the maximum number of withdrawals allowed per period.
Consider if the account is easy to use and whether you can link your checking account with the new high-yield savings account and take advantage of automation.
To reduce risk, you’ll probably want your high-yield savings account protected by the federal government through either FDIC insurance at banks or the National Credit Union Administration (NCUA) at credit unions.
Both provide up to $250,000 in protection per account holder.
Lastly, consider a company’s reputation before opening an account with them.
You can start your search for high-yield savings accounts online or explore some local options using the table below.
By looking at these factors, you can choose a high-yield savings account that’s trustworthy and helps you earn more money.
Interest income is generally taxable, but it’s still a relatively low-risk way to grow your savings.
Cary predicts that interest rates will likely rise a bit more in 2023, and switching soon to a high-yield savings account could be a good idea as Fed rates rise.
Your APY can increase on existing accounts, and the more time your funds have to grow, the more you’ll earn.
»Experts itemize the benefits of a high-yield savings account«
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