A savings account is a great place to keep your money in case you need access to quick cash for an emergency. It’s also a safe space to store your funds while you save up for a financial goal or if you’re ready to invest. But not all savings accounts are worthy of your hard-earned money.
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Most traditional account banks have a very low annual percentage yield (APY), meaning you’re not earning much interest. According to the Federal Deposit Insurance Corporation, the average APY for savings accounts as of March 17, was 0.41%, which isn’t much.
However, a high-yield savings account offers a much higher APY which allows you to accrue more interest and grow your money faster.
“High-yield savings accounts can help you earn a bit on your money given where interest rates are today,” said Eric Mangold, founder and wealth manager of Argosy Wealth Management. “If you have cash parked in a savings account, you should review what APY you are earning. If it’s low, and given where rates are today, you may be able to earn 3-4% or even more on your money in a high-yield savings account.”
Not having your money in a high-yield savings account could be a costly mistake, here’s how.
It’s already been established that a traditional savings account doesn’t offer customers a high APY, but a high-yield savings account can average anywhere from 3-5%. According to U.S. News & World Report, the highest account for March 2025 is Cloudbank 24/7, with a 4.57% interest rate.
With that in mind, if you were to open an account with $24,450, in one year, you’d only earn $100.25 in interest from a traditional savings account with a 0.41% APR. However, if you put $24,450 in a high-yield savings account with a 4.5% APY, you’d earn $1,100.25 in a year. Therefore, you’d miss out on $1,000 in interest.
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A high-yield savings account will earn you more interest, but there can be a downside:
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Limits on withdrawals. While it’s easy to take out funds, there can be a limited number of times per month or year. Going over could rack up fees.
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Investing in the S&P 500 has had a bigger yearly return of 12.39% over the last decade, per U.S. News & World Report, which is more than double the 4-5% APY of a high-yield savings account.
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APY rates can fluctuate quickly depending on the market.
