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MoneyWatch: Managing Your Money

Here's how much a high-yield savings account earns

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By
Matt Richardson
Sr. Managing Editor, Managing Your Money
Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
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Matt Richardson

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Recent activity from the Fed has made high-yield savings accounts an attractive option for many.  Getty Images/iStockphoto

With concerns over inflation ongoing and grocery and food shopping prices still high, many Americans are looking for any edge they can get. This can take many forms, including a revision of their current investments and savings. Fortunately, there are actually a few advantages to rising interest rates, namely a boost to the money one can earn with their savings accounts.

While interest rates on mortgages and refinancing have increased exponentially in recent months, high-yield savings accounts are now offering account holders significantly more interest than they had been in recent years. But how much can you actually earn by opening up this sort of account? We will break down these numbers below. 

If you think you could benefit from opening a high-yield savings account then .

.

How much a high-yield savings account earns

How much you can earn from a high-yield savings account really depends on the rate the bank or credit union offers you as well as how much you deposit into it. The more money you put in the quicker compound interest will generate, significantly growing your initial investment.

High-yield savings can have an Annual Percentage Rate (APR) that's 10 times higher or more than a typical savings account. The particular rate you get will depend on the servicer, but with repeated rate hikes from the Fed, interest rates on these accounts are currently hovering between 3.50% to 4.50%. The average savings interest rate, meantime, is approximately 0.33% at the time of writing. 

So if you're barely making a dent with your current savings account - and would like to earn significantly more with very little effort - then a high-yield savings account is worth securing. It's easy to get started. . 

.

What a high-yield savings account looks like

If you're a visual person who wants to see bottom-line numbers, here's what a high-yield savings account can do for you:

$500 balance: 

  • $1.65 after a year with a regular savings account with 0.33% APR
  • $17.50 after one year with a high-yield savings account with 3.50% APR

$1,000 balance: 

  • $3.30 after a year with a regular savings account with 0.33% APR
  • $35.00 after one year with a high-yield savings account with 3.50% APR

$5,000 balance: 

  • $16.50 after a year with a regular savings account with 0.33% APR
  • $175 after one year with a high-yield savings account with 3.50% APR

The bottom line

There aren't many drawbacks to high-yield savings accounts, although account holders should be aware that interest rates can always drop again. But they could also increase from where they are now, leading to more opportunities to make cash quickly. And even if they were to drop, they're still typically better than a traditional savings account, which offers minimal incentives besides basic safekeeping.

If you're ready to start earning more interest then .

.

Edited by Jennifer Earl

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