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Honestly, I never thought “bank interest” would be an income source I’d be writing about. But here we are. Last year my savings account paid me over $800, thanks to the 4.00% APY that top online banks are currently offering on high-yield accounts.
This is one of the lowest-hanging fruit moves in personal finance right now. If your savings are sitting at a big bank earning a measly 0.01% APY, switching to a 4.00% account will literally 400x the interest you’ll earn.
Here’s how I did it, and how you can too.
The big banks are paying you almost nothing
If your savings are stored at Bank of America, Chase, or Wells Fargo, there’s a good chance your money is earning 0.01% APY right now. That’s the baseline APY for simple savings accounts.
On a $20,000 balance, you’re looking at about $2 a year in interest.
Two dollars. For a full year of keeping your money in their bank. 🤮
High-yield savings accounts flip that math completely. Rates have been running hot the past few years, and even though they’ve come down from their peaks, it’s still not hard to find accounts near 4.00% APY.
Right now my current high-yield savings account pays 4.00% APY. And on my balance that averages around $20,000, that’s where the $800 in interest came from.
Ready to earn more interest on your own savings balance? Peek at today’s best high-yield savings accounts.
Why I keep $20,000 in savings
My savings balance is a mix of my emergency fund and short-term savings for things like travel and bigger purchases, so it floats around depending on what’s going on in life. On average, my wife and I keep roughly $20,000 in there throughout the year.
This emergency fund covers about three to four months of living expenses in case I lose my job and income dries up. Beyond that, I’m not trying to hoard too much excess cash — I’d rather have it invested. But having that cushion in a high-yield account means it’s working for me while it sits there.
Even if you have a smaller savings balance, the math works the same for APYs. It’s absolutely worth keeping any savings in a high-yield account to earn the most interest possible.
$5,000 at 4.00% APY would put $200 in your pocket for doing nothing. That’s still $200 more than the big banks would’ve handed you.
Finding the right account
High-yield savings accounts work just like a regular savings account — the main difference is they’re typically offered by online banks instead of traditional brick-and-mortar institutions.
That means no physical branch to walk into for cash. But that’s honestly the only real trade-off. Everything else you’d expect from a savings account is still there.
Most online banks carry FDIC insurance up to $250,000 per depositor, so your money is just as safe as it would be at any big bank. Many have no monthly fees and no minimum balance requirements either, so you’re not paying to keep your money there.
And when you do need cash, transfers to your checking account are typically fast if you’ve linked them up in the app. My transfers usually happen the next business day.
I set up my first high-yield savings account in less than 10 minutes. And I’ve moved my money a couple times to other online banks since then (mostly because I’m a personal finance nerd who likes to try new things).
The bottom line
Most Americans are leaving a lot of interest on the table by keeping their savings in a big-bank savings account. Or worse — a checking account earning nothing at all.
These days, high-yield savings accounts are easy to open, the money is just as safe, and the rates are still strong enough to make a huge difference — especially if you’ve got a big balance.
If you haven’t made the switch yet, it’s worth taking 10 minutes to see what’s out there right now.
Compare today’s best high-yield savings accounts.
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