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MoneyWatch: Managing Your Money

Why you shouldn't wait to get a high-yield savings account

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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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High-yield savings accounts currently offer interest rates up to 10 times higher than a regular savings account. Getty Images

When purchasing financial products or services, timing can be critical. If you buy a service too early you may end up paying for something you don't need. And if you wait to get it too late you may get stuck with a higher bill. Many people, for example, took advantage of record-low mortgage refinance rates in 2020 and dramatically lowered their monthly mortgage payments. Those who waited, however, saw a window of opportunity narrow when the Fed significantly rose interest rates.

That recent activity hasn't been completely negative, because it has led to a significant boost to what account holders can earn in the bank. Specifically, high-yield savings accounts are now offering interest rates many times higher than what one has been accustomed to earning with a traditional savings account. These recent developments now have many people wondering if now is the perfect time to open a high-yield savings account. Or should they wait and see what happens?

or use the table below to get started.

Why you shouldn't wait to get a high-yield savings account

Here are three major reasons why you shouldn't delay opening a high-yield savings account.

You may already be losing money

Simply put: If your money is in a regular savings account then you're already losing money. The annual percentage rate (APR) on a savings account at the time of writing is around 0.33%. Compare that to the 3.50% to 4.50% you could potentially be earning with a current high-yield savings account and you quickly realize that you're leaving money on the table by maintaining the status quo.

How much money are you losing by not acting now? A substantial amount. Using a $5,000 deposit for comparison purposes, a traditional savings account at that 0.33% interest rate would earn $16.50 over twelve months. A high-yield savings account at 3.50% would earn $175 in that same time period - that's more than 10 times the earnings of a regular account!

If you want to start earning more interest act now. .

Interest rates are unpredictable

If there's one thing consumers have learned about the economy in recent years it's that it's unpredictable. Interest rates were at historic lows and then they weren't. Home prices were at record highs and then they weren't. The only thing consumers can rely on lately is unpredictability. So don't wait to get a high-yield savings account hoping that interest rates on these accounts will rise even higher. They may continue to rise, or they could remain the same, or they could drop.

As mentioned above, timing is critical. But the longer you wait the less time you're giving yourself to earn interest at current rates. So open an account now, start growing your account (and earning compound interest, to boot) and hope that rates for these accounts go even higher. Just don't wait until a perfect time because that may never occur.

They're easy to use and maintain

It can be tempting to put off big financial investments and decisions when you know there's a pile of paperwork and maintenance issues to deal with first. But high-yield savings accounts are very low maintenance. Many banks and credit unions will provide a debit card that you can use to access the account, similarly as you would your other accounts. And the best ones typically don't come with any maintenance fees or minimum deposit and balance restrictions, making these even easier for account holders to operate. 

You may be able to transfer your existing savings account into a high-yield one with your current lender online, without having to go to their physical location. If your bank doesn't offer these options then consider shopping around online, instead. There are many banks that would be happy to have your business and will provide an attractive APR to get it. .

The bottom line

With some financial products and services, it's advisable to wait for the best opportunity. With high-yield savings accounts and the current interest rates they provide, however, now may be the best time to act. 

Many regular savings account holders are losing money by not opening this type of account and they should consider it now before interest rates change again. Considering that they're easy to use and maintain many people shouldn't wait to get a high-yield savings account.

Edited by Jennifer Earl

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