I earned well over $100 in interest on a high-yield savings account last year, and now I recommend these accounts all the time
- I had some extra money at the beginning of 2019 and decided to put it in a high-yield savings account where it could accrue some interest.
- I opened a high-yield savings account with Marcus by Goldman Sachs and in one year, I earned $124.38 in interest.
- I wasn't ready to invest my money in the stock market at the time, and I recommend opening a high-yield savings account to anyone who's in a similar position.
- Find out who has the best high-yield savings account rate right now »
I had a very good problem at the beginning of 2019: I had extra money and I didn't know what to do with it.
I had been budgeting diligently, already built up my emergency fund, and had reached my other savings goals. I was left with a decent chunk of change to (potentially) grow. But I wasn't ready to take on the risk of investing in the stock market, and was on the hunt for a safer option.
Research led me to discover and open a high-yield savings account. I decided to take the plunge and open one, and I'm happy I did.
What are high-yield savings accounts?
These accounts are typically available from online banks and pay a higher interest rate than a traditional savings account. There's typically no minimum amount to sign up and you can withdraw your money whenever you want (up to six times each month). You can also set up regular deposits, the same way you would a regular savings account.
By the end of 2019, I had over $8,400 in my high-yield savings account and had accrued $124.38 in interest. Interest rates have dropped pretty significantly since I first opened my account, but they are still 20 times higher than traditional savings accounts. High-yield savings accounts also offer more liquidity than a certificate of deposit.
Growing my money in a high-yield savings account
My high-yield savings account serves as an additional savings account, which I use for bigger purchases that may come up.
While you can use a high-yield savings account for emergencies, I find it's best for me to have some money stored elsewhere. It can take a couple business days to transfer your money out of a high-yield account, and most online banks don't have physical locations where you can withdraw money. I make sure to have a couple months' worth of emergency expenses in a traditional savings account at the same bank as my checking account (which allows for instant transfers) for more urgent situations.
I opened an account with Marcus by Goldman Sachs in January 2019 and initially deposited $5,000. I set up an automatic monthly transfer of $200 for the first six months, increasing it to $250 in August.
In November, I decided to get my Certified Financial Planner certification, which includes a nine-month course. The course cost around $5,700. I decided to use the money out of my high-yield savings account to pay for the class, leaving me with just under $3,000.
Planning for my 2020 goals
One of my financial goals for 2020 is to beef up my high-yield savings account in anticipation of my future money goals. I'm planning on moving to New York City in September, and anyone who lives there knows it's not cheap. To prepare, I've cut back on my spending and have been depositing $600 each month into my Marcus account.
Once my high-yield savings account reaches $7,000, I'll probably begin investing my money elsewhere. I'm young, and now understand I can afford to make riskier investments (with larger potential returns). The money in my high-yield account can protect me if an emergency arises, like job loss or injury. I've currently saved a little over $4,500, and earned $10 in interest in 2020.
Overall, I'm extremely happy with the way my money has grown in my high-yield savings account. If you have extra money you're not comfortable risking on the stock market, I'd recommend a high-yield savings account.
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