What if I told you that there was one simple decision you could make to stop losing hundreds of dollars a year? But this type of lost money isn't the same as an extra cost or a pay cut; instead, it's a loss of extra income that you could be getting. Here's how to boost your income in 2024, with minimal effort: Open a high-yield savings account.
Let's look at a few reasons why getting a higher yield on your savings could be a smart, easy way to improve your personal finances in 2024.
Banks are paying higher APYs on savings in 2024
During the past two years of rising interest rates, many banks and credit unions have started to offer higher APYs (annual percentage yields) on savings accounts. The best high-yield savings accounts are paying over 5.00% APY (as of Jan. 14, 2024). But too many Americans are still not moving their money to higher-yielding accounts.
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If your savings are only getting the national average APY of 0.46% (as of Jan. 14, 2024), you're missing out on free money. The typical American has $1,200 in their savings account, according to The Ascent's research. And $1,200 in a 5.00% APY savings account would earn $60 in one year.
It's true that $60, or about $5 per month, isn't a lot of money and might not be worth switching banks for. But if you have more cash in savings than the typical American, if you instead have the recommended three to six months' expenses in your emergency savings, you could be missing out on significant money.
How much interest can you get with a high-yield savings account?
Some of the biggest U.S. banks offer terrible APYs on savings accounts. Depending on your bank, your savings account might only be getting 0.01% APY! You can do better than that.
Here are a few examples of how much cash your savings can earn in one year if you switch from a near-zero APY to a high-yield savings account:
| Savings account balance | Big bank savings account (0.01% APY) | High-yield savings account (5.00% APY) |
|---|---|---|
| $5,000 | $0.50 | $250 |
| $10,000 | $1 | $500 |
| $25,000 | $2.50 | $1,250 |
Data source: Author's calculations.
That's not a typo: If you have $10,000 in a bank savings account that pays only 0.01% APY, after one year you'll earn…$1. This means that after inflation, your savings account is losing purchasing power. Leaving your savings in a bank that doesn't pay yield is effectively like losing money.
Don't you deserve better than that? That $10,000 of savings would earn you $500 after one year in a high-yield savings account. Why not go get the higher yield on your savings that your money is worth?
Why settling for low-yield savings is a bad money move
Think about it this way: At your job, you always want to try to get paid the most money possible, right? You would never say to your employer, "No thanks boss, I don't want a pay raise this year. I don't want extra money. You can keep that money for yourself!" So why would you say that to your bank?
In the job market, you deserve to earn as much money as your skills, talents, and work ethic can command. If your employer isn't paying you enough, you can switch to another employer that pays better. It's the same way with banking: Your savings deserve to earn a certain amount of money, based on interest rates. If your bank isn't paying you enough for your savings, it's time to consider switching banks.
Bottom line: Many Americans don't have $500 of emergency savings. If you are living paycheck to paycheck and don't have much money saved, the amount of APY you get on a savings account is not your highest priority. But if you do have a decent amount of cash sitting in a savings account, it's time to pay attention to how much (or how little) yield you're earning from your bank. Depending on your savings account balance, you could be missing out on hundreds of dollars of extra money. Give your savings a "pay raise" -- open a high-yield savings account in 2024.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
