Whether you’re looking to purchase your first car, renovate your home, or further your education, saving money is an important part of your overall financial health. No matter your goals, there are a variety of savings tools available to help you prioritize and grow your hard-earned money over time. From investing in stocks to making use of different types of savings accounts, the tools you choose will depend on your specific financial objectives and how much risk you are willing to take with your money. You may even choose to use a range of different tools for short-term goals vs. long-term goals. Opening a high yield savings account (HYSA) is one way to steadily grow your money through high interest rates with minimal risk. Keep reading to learn more about HYSAs, the pros and cons, and how to choose the best one for you.
Maximize Savings and Minimize Risk with a High Yield Savings Account
A high yield savings account (HYSA) is a tool you can use to steadily grow your money with minimal risk. In this guide, you'll learn more about HYSAs, their pros and cons, and how they compare with other savings options.
What is a high yield savings account?
A HYSA is a type of savings account that offers a high annual percentage yield (APY). APY is the percentage of interest earned on your money within one year. The APY is significant with a HYSA account because the interest rate offered is typically higher than interest rates on a standard savings account, helping your money grow faster in a shorter amount of time.
HYSA vs. standard savings account
The biggest difference between a HYSA and a standard savings account is the interest earnings opportunity. A HYSA’s higher interest rate provides you with a better rate of return on your initial deposit. According to the Federal Deposit Insurance Corp. (FDIC), the national average interest rate on a traditional savings account is 0.45%, while many HYSAs offer interest rates at several times that amount.
For example, if you deposit $1,000 in a HYSA and earn 4.5% annually, you’ll earn about $45 in interest in one year. If you put the same initial amount in a standard savings account at 0.45%, you would only earn about $4.50 in interest in one year.
Keep in mind that a HYSA may have different requirements than a standard savings account, including a minimum deposit amount to open an account and monthly maintenance fees, and those policies vary between each financial institution. Learn more about Laurel Road’s HYSA here.
HYSA vs. other accounts
It can be helpful to compare other common investment accounts to those of a HYSA when you are deciding how to invest your money and build your savings.
How do high yield savings accounts work?
While certain accounts may accumulate interest differently, typically a HYSA accrues daily and compounds, meaning interest earns interest. Even if interest accrues daily, it typically pays out at a monthly rate.
Use this HYS calculator to estimate how much you could earn on your initial deposit and regular monthly deposits over different time periods.
High Yield Savings Calculator
Estimate how much interest you could earn with a Laurel Road High Yield Savings account compared to the national average APY for other savings accounts.
Interest You Could Earn
This calculator is for illustrative purposes only. Calculations are estimates of expected interest earned and actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. Calculated values assume that principal and interest remain on deposit and are rounded to the nearest dollar.
All APYs are subject to change at any time before or after account opening. Laurel Road Annual Percentage Yield (APY) as of XX/XX/XX. National average APY reported by reported by the FDIC as of XX/XX/XX.
What do you need to open a high yield savings account?
Opening a HYSA account is similar to any other bank account in that you will need to fill out an application either online or in person and provide the following information:
- Your name, address, and other contact information
- Your Social Security number
- Acceptable government-issued ID (driver’s license, passport)
- Details to set up a wire transfer, move funds from your checking account, or a check to deposit the initial savings amount
A financial institution may also require you to disclose information about your employment, existing debt, and other bank accounts before they approve you. Once you are approved, you’ll need to register for an online account with a unique login and password.
Remember that some HYSAs may require a minimum deposit amount to open an account, plus monthly maintenance fees.
How to choose the right HYSA
It’s important to compare a few HYSAs to find the one that works best for you and your money. Consider the following factors as you read the fine print:
Interest rates
The amount of interest you earn on your savings in a HYSA will differ between financial institutions. Remember that the interest rates for a HYSA can change over time depending on how the market fluctuates. That is to say, you aren’t locked into one interest rate as you would be with a CD, which guarantees a fixed interest rate for your investment.
Fees
Some financial institutions may charge fees if a savings account dips below a certain minimum amount or may have a monthly or annual service fee. Others may not charge any fees at all.
Accessing funds
If you want to easily access your savings when needed, double-check how your HYSA handles withdrawals. Some HYSAs may set limits on how and when you can withdraw funds.
Minimum deposits
Some HYSAs may require you to deposit a minimum amount of money when you open the account. This amount may vary, but it’s always important to confirm if it’s an amount you can afford. You may also be required to keep a minimum balance at all times.
When to use a high yield savings account
A high yield savings account can help you save for big purchases such as buying a house, booking a special vacation, paying for a wedding, or fixing that pesky leak in your roof. A HYSA is also a good way to build or pad your emergency fund in case unexpected expenses arise in the future. Most financial advisors recommend having 3-6 months’ worth of your salary on hand in case of an emergency, such as a large medical bill, home repairs, or job loss. A HYSA can help you reach that goal more quickly than a traditional account. It’s a secure, low-risk way to save and protect your money as you work towards your financial goals, and you can typically withdraw money as you need it.
To get the most out of your HYSA, consider setting up a regular direct deposit of funds from your checking to your HYSA account once a month or every time you get paid. An automatic deposit is a simple way to help build your savings consistently and reach your financial goals sooner without doing any extra lifting.
High yield savings account with Laurel Road
With competitive rates and minimal requirements, HYSAs provide a secure and flexible way to enhance your financial health. Laurel Road’s HYSA option makes it easy to start saving with no minimum balance requirements and no monthly maintenance fees. Additionally, deposits are insured by the FDIC up to $250,000, ensuring your funds are protected. Explore how a Laurel Road HYSA can help you achieve your financial goals.
Don’t miss the latest financial resources.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Get tailored Laurel Road resources delivered to your inbox.
Search Results