Putting your money in a high-yield savings account is a great way to maximize your earnings and grow your money over time. But just how much can you earn based on today’s interest rates?
Our savings calculator makes it easy to find out. Using the three sliders at the bottom of the calculator, select your initial deposit, how much you plan to contribute each month going forward, and the number of years you plan to save at this pace.
As you make your selections, the calculator will automatically update to display your total estimated interest earnings based on a rate of 4.50% annual percentage yield (APY) compared to what you would earn if you stuck with the national average savings account rate (just 0.46%).
Compare savings account rates
A rate of 5% APY might seem high—and it is when compared to the typical savings account rate. The good news is that many banks offer competitive savings account rates in this range—you just need to know where to find them. Here are a few banks that regularly offer rates above 4.50% APY:
Definitions
- Initial deposit amount: The amount of money you first deposit into your savings account. This amount, and all subsequent deposits, will earn interest over time and help grow your savings.
- Additional contributions: Any extra amount you deposit into your savings account beyond the initial deposit amount. These contributions can be regular, such as monthly or quarterly, or they can be irregular, one-time deposits.
- Years to save: The number of years you plan to keep your money in your savings account. The more time you have, the more your interest will compound and increase your total earnings over time.
- Interest rate: The percentage at which your money grows annually in your savings account. The higher this rate, the more money will accumulate.
- APY: The APY is the total interest you earn on your savings in a year and takes compounded interest into account. It's a more accurate representation of what you earn than a simple interest rate.
- Interest compounding: How often the interest you earn is added back to your savings account. The frequency of your compounding—daily and monthly—impacts how quickly your savings grows.
How does savings account interest work?
When you put money into a savings account, this balance earns money called interest. Your interest is usually calculated daily, but only deposited monthly, although this varies by banking institution. Your interest rate, expressed as the APY, is what determines how much you're earning on the money in your account.
Almost all savings accounts use compound interest, which means that the interest you earn is added to your balance, and then future interest is calculated on this larger amount. Over time, this money can add up, especially with high interest rates and large deposits being added regularly. The frequency at which your account compounds can also impact how much the account grows.
For example, say you deposited $10,000 in a high-yield savings account with a 3% APY that compounds annually. At the end of a year, you’d have $10,300.00 in your account. But if the interest compounded daily, you’d have $10,304.53.
How much should I save each month?
The amount you should save every month depends on your financial goals, income, and expenses. Most people start by building an emergency fund of at least three to six months' worth of living expenses, although if you're outspending what you make, you should consider saving more. And if you have dependents or other larger financial responsibilities, consider saving six to 12 months' worth of expenses.
After you've got your emergency fund, save a portion of each paycheck in a high-yield savings account so you maximize the interest you earn on your money. While it might not seem like much each paycheck, it will add up over time. Some people set up automatic transfers from their checking to savings account. This hands-off approach can set your savings on autopilot. As your earnings increase over time, you can also increase your savings rate. Check out our detailed guide on how much money should be in your checking and savings accounts.
What you need to know about high-yield savings accounts
To make the most of your high-yield savings account, it’s important to understand how they compare to regular savings accounts. Differences in interest rates and where to find the best rates are two of the key differences.
How high-yield savings accounts (HYSA) work
A high-yield savings account is a type of savings account that typically offers a higher interest rate compared to a traditional savings account. You’ll often find the best rates at online banks, which have lower overhead costs than traditional brick-and-mortar banks and pass those savings on to customers through higher yields and lower fees.
Today, the national average savings account interest rate is 0.46%, according to the Federal Deposit Insurance Corp. (FDIC). However, some of the best high-yield savings accounts offer 5% annual interest rates or higher.
What to look for in a high-yield savings account
Before opening a high-yield savings account, shopping around and comparing accounts from several financial institutions is essential. Some of the major features you might evaluate include:
- APY: The main appeal of a high-yield savings account is the higher interest rate or APY. The higher the APY, the more your money will grow over time.
- Fees: Earning a high interest rate doesn’t matter if you lose money to monthly fees. Before opening an account, find out what types of fees the bank charges, such as ATM fees, transfer fees, and penalties for going below a minimum balance. You should choose an account with low or no fees to maximize your earnings.
- Minimum balance requirements: Some banks require a minimum account balance to earn the highest yield, avoid fees, or keep the account open. You might be better off with a different account if you can't maintain this balance. Prioritize high-yield savings accounts with low or no minimum balance requirements.
- Accessibility: It’s important to have easy access to your money. Look for options like online and mobile access, ATM access, and the speed of bank-to-bank transfers.
- Customer service: Good customer service can be crucial if you need a helping hand. Before opening an account, read reviews from sites like the Better Business Bureau and Trustpilot to learn about other customers’ experiences. Also, check whether the bank offers multiple methods to reach support, including phone, chat, email, etc.
FDIC or National Credit Union Administration (NCUA) insurance: Make sure any bank or credit union you choose is insured by the FDIC or the NCUA. If the bank or credit union fails, this insurance means your deposits are protected up to $250,000 per depositor, ownership category, and institution.
How to make the best out of your savings
Getting a great rate is just the first step. If you want to pump up your savings even more, consider these tips:
- Automate: Many banks let you set up automatic monthly transfers from your checking account to your savings account. These transfers help ensure you regularly contribute to your savings—and without having to lift a finger.
- Link a checking account: If your bank offers overdraft protection, you can link your savings account with your checking account and use the balance as a buffer to cover transactions that would put you in the red. Remember that some financial institutions may still charge a fee for overdraft protection, but it’s often much less than an overdraft or insufficient funds fee.
- Open more than one account: If you’re saving for multiple goals simultaneously, you may want to open a separate savings account for each. Some savings accounts even allow you to create “sub-accounts” to organize your savings into buckets. Whether it’s a vacation, emergency fund, or college tuition, separating your savings can help you better track your progress.
- Use a budgeting app: To maximize the interest you’re earning in a high-yield savings account, be sure you’re socking away as much as possible. A budgeting app can help you find room in your budget and increase your monthly savings.
When is it worth switching banks?
One of the most common reasons someone will switch banks is if their interest rates aren't competitive and they can find better rates elsewhere. While it may be tempting to switch banks if your current bank doesn't offer competitive interest rates, there are other considerations to keep in mind. Does the other bank offer extra benefits, such as lower fees, more accessibility, better hours, or enhanced online and mobile banking features?
For example, if you regularly stop into a branch to handle transactions, it might not make sense to switch to a high-yield savings account offered by an online-only bank. Weigh all factors—not just your interest rate—before making a switch.
Frequently asked questions
How often do banks deposit interest rates in savings accounts?
Even though the compounding rate varies by bank and account, interest earned in a savings account is typically credited to your account monthly.
How much interest would $10,000 earn in a savings account in a year?
The interest that $10,000 would earn over a year depends on the annual percentage yield and frequency of compounding. For example, a 4% APY that’s compounded daily would result in $408.08 in annual interest earnings. You can browse the best high-yield savings account rates to explore your earning potential.
How often do banks deposit interest rates in savings accounts?
Even though the compounding rate varies by bank and account, interest earned in a savings account is typically credited to your account monthly.
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal amount that you deposited. Compound interest, on the other hand, is calculated on the initial principal and the accumulated interest from previous periods.
How do banks calculate interest on savings accounts?
Banks use either the simple interest or compound interest formula to calculate interest on a savings account.
Simple interest formula: Principal x interest rate x time period
Compound interest formula: A = P(1 + r/n)nt
- A: accrued amount (principal + interest)
- P: principal
- r: rate
- n: number of compounding periods per unit of time
- t: time in decimal years (for example, six months would be 0.5 years)
How much interest would $10,000 earn in a savings account in a year?
The interest that $10,000 would earn over a year depends on the annual percentage yield and frequency of compounding. For example, a 4% APY that’s compounded daily would result in $408.08 in annual interest earnings. You can browse the best high-yield savings account rates to explore your earning potential.
How often do banks deposit interest rates in savings accounts?
Even though the compounding rate varies by bank and account, interest earned in a savings account is typically credited to your account monthly.
How often is interest paid on a savings account?
While the compounding frequency will vary by bank, savings account interest is often compounded daily and credited to your account monthly.
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal amount that you deposited. Compound interest, on the other hand, is calculated on the initial principal and the accumulated interest from previous periods.
How do banks calculate interest on savings accounts?
Banks use either the simple interest or compound interest formula to calculate interest on a savings account.
Simple interest formula: Principal x interest rate x time period
Compound interest formula: A = P(1 + r/n)nt
- A: accrued amount (principal + interest)
- P: principal
- r: rate
- n: number of compounding periods per unit of time
- t: time in decimal years (for example, six months would be 0.5 years)
How much interest would $10,000 earn in a savings account in a year?
The interest that $10,000 would earn over a year depends on the annual percentage yield and frequency of compounding. For example, a 4% APY that’s compounded daily would result in $408.08 in annual interest earnings. You can browse the best high-yield savings account rates to explore your earning potential.
How often do banks deposit interest rates in savings accounts?
Even though the compounding rate varies by bank and account, interest earned in a savings account is typically credited to your account monthly.
