3 Ways to Use a High Yield Savings Account

Saving is essential to your financial success. They provide a safety net in the event of the unexpected and help you allocate money for multiple purposes. If your monthly budget does not include a line for savings contributions, it should.

When it comes to where to put those savings, a high yield savings account East a great choice. In all savings accounts, your money earns compound interest, allowing your balance to grow without any action on your part. Your funds are easily accessible, unlike CD that penalize you for withdrawing funds before a certain date. And your money is FDIC insured up to $250,000 per account per bank.

But with a high-yield savings account, you earn much more interest only with a regular savings account. The average interest rate for regular savings accounts is currently around 0.37%. In contrast, high yield savings accounts offer average rates of around 3.5% to 4.5% (if not more). It can make a big difference over time.

High yield savings accounts are ideal for several purposes. In this article, we’ll explore some of the best uses for this type of account.

Start researching rates now to see how much you could earn with a High Yield Savings Account.

3 Ways to Use a High Yield Savings Account

You can use a high yield savings account for anything you want. It’s your money and there are no restrictions on how you spend it. But to get the most out of your account, consider using it in one of these three ways.

1. For an emergency fund

Because they’re so liquid, high-yield savings accounts are great for building up an emergency fund you might need access to at any time. An emergency fund can cover you in any type of unforeseen situation, from job loss to major home repairs to big medical bills. Experts recommend save at least three to six months” the equivalent of your living expenses, but any amount you can set aside is a good start.

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2. For short-term savings goals

Short-term savings goals are expenses you expect to pay for in the next few years, such as a vacation, a new appliance, or holiday gifts. A high-yield savings account allows you to save funds for these purposes, without the temptation to dip into them (as you might feel with a checking account). You can even have multiple accounts for multiple goals to make it easier to track your progress.

3. For large purchases

For big expenses like a new car, a wedding, or a down payment on a house, a high-yield savings account can help you reach your goal faster.

For example, let’s say you deposit $1,000 into a regular savings account at 0.37% APY. After one year, you will have made $3.70. But deposit that amount into a 3.5% high-yield savings account and you’ll have earned $35. The more you contribute and the longer you save, the faster the interest accrues.

Plus, paying big expenses in cash frees you from relying on financing like credit cards, which can cost you more for years to come due to interest charges.

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The bottom line

A high yield savings account is an important part of any financial plan. When choose an account, be sure to shop around, compare rates, and consider all account features (such as access to ATMs) and fees (such as maintenance fees and minimum balances). Do your homework, and you can find the best high yield account for you and your goals.