Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: Today’s question comes from Peggy. She writes: “How do I find a good high-yield savings account?”
A: Great question, Peggy. First, let’s start with exactly what high-yield savings accounts are. A high-yield savings account, also referred to as a HYSA, is a bank account that pays a higher rate of interest on your deposits than you’d get in a traditional savings account.
HYSAs exist primarily online, which requires making some administrative adjustments depending on how you want to use the account. They are best for money you don’t need to access frequently. Think an emergency fund, near-term savings (for down payments, big purchases, tuition, etc.), and not long-term savings (anything over three or five years) or everyday spending money. There are a number of other important differences between traditional savings accounts and HYSAs.
The national average rate on savings accounts is currently around .38%, with plenty of accounts paying even less than that. In comparison, we see HYSAs with APYs (that’s annual percentage yield, which takes into account how frequently interest is compounded–daily, weekly, monthly, etc.) in the range of 3.80% and 4.25% APY, with some top-tier accounts currently offering up to 5.00% APY.
So, how do you find a HYSA that’s right for you? I would start with a couple of online comparison tools, like this one. There, you can get a side-by-side look at some of the key factors, starting with the interest rate, the minimum deposit required (in some cases, it’s $0), service fees and others.
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