A high-yield savings account is a savings account that earns an above-average interest rate on deposits, allowing your bank balance to grow faster than with traditional accounts. The average national rate for savings accounts is 0.45%, but a high-yield savings account will earn you anywhere from 4% and up. 

To put that into perspective, with a 4% APY (Annual % Yield), a savings balance of $1,000 would earn about $41 after a year. It may not make you wealthy, but the earnings are much better than in an account with an APY of, say, 0.50%, which would earn about $5 during the same time period. Interest in a savings account compounds, which means the interest you earn on your money also earns interest. Take that same $1,000. If you leave it in your 4% APY account for three years and it "compounds" interest each month, you’ll earn about $127.

USES

This type of account is great for short terms goals and emergency funds. A common rule of thumb is to have enough money in a savings account to cover 3-6 months of your expenses in case of job loss or other emergency. Other uses include......

Down payment on house

Vacation saving

Cover repairs or Maintenace of things such as your house or car

Where do I open an account?

There are a plethora of options for a savings account. A lot of online banks offer very good rates and have a $0 minimum. Companies such as SoFi, Citigroup, PayPal, and American Express all have options that are FDIC insured. This means every dollar up to $250,000 is insured. Make sure your bank is FDIC insured before putting any money into an account.

On the reviews page are 3 savings account I have used and found easy to navigate or recommend. You can find these accounts by typing High yield savings and the company name into your search bar. Switching money from one account to another is fairly easy and getting the account set up is even easier. 

Many online savings accounts also have no monthly maintenance fees. That can go a long way toward boosting your bank balance.

How often do savings rates change?

Savings rates are variable and can technically change at any time. It’s common to see a bank’s rate remain the same for several weeks. But if the Federal Reserve recently cut or increased rates, you will often see several banks change their savings rates around the same time.

Final Thoughts