These are the 3 best uses for a high-yield savings account (2024)

Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.

It's good to have a separate savings account for your emergency fund and short-term savings goals, rather than keeping all your money in a checking account where you might be more tempted to spend it.

And if your money is going to sit in savings, you should try to make the most of it. With a high-yield savings account, you earn more interest than with a traditional savings account. Thanks to compound interest— which means your cash is earning interest on interest— your money grows at a faster rate.

CNBC Select ranked the five best high-yield savings accounts, and each one could earn you at least 10X more money than the national average APY on savings accounts, which is just 0.04%, according to the Federal Deposit Insurance Corporation (FDIC).

Below, we list the three best uses for stashing your cash in a high-yield savings account.

1. Emergency funds

During economic downturns, such as the one we are experiencing right now, it's essential to have an emergency fund to fall back on. While financial experts generally recommend having enough saved to cover at least three to six months' worth of expenses, this may not be realistic for everyone. Your best bet if you have extra cash is to put it in a high-yield savings account that can increase your savings but give you the option to withdraw the money if you need to. By law, consumers can withdraw or transfer cash out of a high-yield savings account up to six times per month without paying any fees.

Currently, this rule has been temporarily lifted, allowing savings account holders to "make an unlimited number of convenient transfers and withdrawals from their savings deposits," according to a statement by the Federal Reserve Board.

CNBC Select ranked the Synchrony Bank High Yield Savings as the best choice for easy access to your cash since it offers users convenient withdrawal options, including an optional ATM card.

2. Short-term savings

It's fun to have a savings goal in mind, and it's even better when you have a strategy in place to help get you there on time.

For this reason, high-yield savings accounts are "a fantastic way to save up cash for short-term goals or needs that are within a year or two," Shon Anderson, a certified financial planner and president at Anderson Financial Strategies, tells CNBC Select.

This might include saving up for a family vacation or a new car.

And if you're someone who needs a little motivation to save, the Varo Savings Account offers tools to help you. Not only does it offer a higher rate of return, or APY, if you save more, but the online bank also offers two programs: Save Your Pay and Save Your Change. Both options automatically transfer money from your Varo bank account to your savings account.

3. Large expenses

A higher yield on your money can really help you when saving up for a large purchase, such as a down payment on a home. You'll earn more with compound interest if you put your money into a high-yield savings account.

For example, with the Vio Bank High Yield Online Savings Account, account holders get one of the highest APY rates for high-yield savings accounts, at 1.10%. There is a minimum $100 deposit required to open an account, but that is lower than what some of the other high-APY savings accounts require. This can really benefit you over time.

If you were to put $10,000 into a Vio high-yield savings account, your deposit could yield $58 after just one year.

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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every banking review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of banking products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Information about the Synchrony Bank High Yield Savings,Vio Bank High Yield Online Savings Account, and Varo Savings Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Synchrony Bank is a Member FDIC. Vio Bank is a division of MidFirst Bank, Member FDIC. Varo Bank Account Services are provided by The Bancorp Bank, Member FDIC.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

These are the 3 best uses for a high-yield savings account (2024)

FAQs

These are the 3 best uses for a high-yield savings account? ›

Good for short-term savings goals: With better-than-average interest rates, high yield savings accounts make it easier to build your savings and reach short-term goals. Ideal for an emergency fund: A high yield savings account is a safe, accessible place to park your emergency fund and build your financial resilience.

What should you use a high-yield savings account for? ›

Good for short-term savings goals: With better-than-average interest rates, high yield savings accounts make it easier to build your savings and reach short-term goals. Ideal for an emergency fund: A high yield savings account is a safe, accessible place to park your emergency fund and build your financial resilience.

What is the catch to a high-yield savings account? ›

Like traditional savings accounts, some financial institutions may limit the number of withdrawals and transfers you can make from a high-yield savings account each month. Exceeding this limit could possibly result in fees or restrictions on your account.

Who typically uses a high interest savings account? ›

A high-yield account might be a good option for anyone looking to save money for a large purchase, a short-term or mid-range financial goal, or cash you want to keep safe, Alderete says.

Do millionaires use high-yield savings accounts? ›

Millionaires Like High-Yield Savings, but Not as Much as Other Accounts. Usually offering significantly more interest than a traditional savings account, high-yield savings accounts have blown up in popularity among everyone, including millionaires.

What is the downside of a high-yield savings account? ›

Some disadvantages of a high-yield savings account include few withdrawal options, limitations on how many monthly withdrawals you can make, and no access to a branch network if you need it.

Do I need to pay taxes on a high-yield savings account? ›

All of your high-yield savings account interest is taxable. Your financial institution will send you a Form 1099-INT once you earn more than $10 in interest.

Is it smart to keep money in a high-yield savings account? ›

Not the best choice for long-term savings – High-yield savings accounts offer much better interest rates than traditional savings accounts, but often, you won't earn enough over the long-term to account for inflation. Investments may be a better option for a longer-term, greater yield.

Can you take money out of a high-yield savings account? ›

Unlike CDs, which are locked in for a fixed term, you can withdraw and transfer funds in an HYSA without any penalty. That could be helpful if you're nervous about an unexpected expense. Many accounts provide optional access to an ATM card, though the number of transactions or amount you can withdraw may be limited.

Do high-yield savings pay monthly? ›

Interest is generally compounded on a daily, monthly, or quarterly basis, depending on the terms of the account.

What are the benefits of Hysa? ›

HYSAs vs. Traditional savings accounts

As mentioned above, the main benefit of an HYSA is they offer higher rates. According to the Federal Deposit Insurance Corporation (FDIC), the average interest rate for a regular savings account is just 0.46% (as of April 2024).

Is it worth putting money into a high-yield savings account? ›

High-yield savings accounts are an excellent choice for building an emergency fund. They provide a safe place to store cash you might need readily available for unexpected expenses. Keeping three to six months' worth of living expenses in a high-yield account is a common guideline. Short-term goals.

How much will 50000 make in a high-yield savings account? ›

5.5% APY: Choosing a 5.5% CD or high-yield savings account will result in $2,750 in interest on your $50,000 investment annually. 5.75% APY: A 5.75% CD or high-yield savings account will earn you $2,875 in interest in one year.

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