When opening a savings account, I care about two factors. How will this account make me money, and how will it do so better than competitors? There are thousands of accounts out there. Only the best will do, but what does it mean to be the best savings account?
At The Ascent, we focus on great rates over pretty much everything. For good reason — compound interest is more profitable than most people realize. Many don’t realize that you can do much better than the typical interest rate advertised by banks.
Two more takeaways you won’t find in a typical bank review:
- Make saving automatic
- Simple accounts are best
Read on to learn why each point is so important to earning you money.
Our Picks for the Best High-Yield Savings Accounts of 2024
American Express® High Yield Savings APY 4.25%
| APY 4.25%
| Min. to earn $1 |
Western Alliance Bank High-Yield Savings Premier  APY 5.31%
Min. to earn $500 to open, $0.01 for max APY
| APY 5.31%
| Min. to earn $500 to open, $0.01 for max APY |
UFB Portfolio Savings Account  APY 5.15%
| APY 5.15%
| Min. to earn $0 |
1. You can do much better than the average rate
Take a guess. What’s the typical savings account rate? According to the Federal Deposit Insurance Corporation (FDIC), it’s 0.45%. That’s peanuts. You could easily earn 10 times that rate. Though rates change often, you can generally do much better than the average.
Here’s why it matters. The table below shows the interest you would earn on a $10,000 deposit in your savings account.
| APY | Time in savings account | Interest earned |
|---|---|---|
| 0.45% | 5 years | $234.00 |
| 0.45% | 10 years | $468.00 |
| 4.50% | 5 years | $2,522.94 |
| 4.50% | 10 years | $5,682.60 |
Data source: Author’s calculations.
By switching to a high-yield savings account, you can quadruple your earnings and then some. Sure, you’ve got to keep your money in your account for years to earn the most. But it’s a good idea to keep an emergency fund, anyway. You never know when you might need it.
2. Turn on automatic savings
This year, I confronted my biggest tax bill ever. I underestimated how much I owed the IRS. I would have been down big if it weren’t for one feature: automatic savings. It moves 10% of each paycheck to my savings account.
I used this money to save thousands of dollars and fund most of my tax bill. It protected me from making a dreaded late payment (or taking out a loan — gulp).
My banking app Chime offers this feature, but it isn’t exclusive to Chime. Chances are high your bank offers it. I’d highly recommend turning it on. Making “saving money” automatic is one of the easiest ways to start saving more than you are right now.
3. Simple is best
It’s easy to get sucked into bank promotions and APYs, to the exclusion of everything else. But I’ve lost more money to complexity than I’ve made on promos and compound interest. Savings (and paired checking accounts) often slip in fees you’d never think to look for.
The worst fees:
- Account minimum fees
- Overdraft fees
- Nonsufficient funds fees (NSF)
Hungry bank fees are difficult to see coming. Plus, they’re expensive. Let’s assume you’ve got $5,000 in the bank, and your APY is 0.50% — better than typical. A single $10 fee would cost you four months of interest. Not good!
Brick-and-mortar banks are among the worst fee offenders. But the best brick-and-mortar banks (Capital One among them) charge none of these account fees, keeping it simple.
You don’t have to turn on auto-savings or focus on simplicity to save money. But doing both has dramatically improved my finances. Why not yours?
These savings accounts are FDIC insured and could earn you 14x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 14x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
