The right savings account is a must to get the most from your money.
Since last year, there have been several interest rate hikes. While savings accounts previously offered barely anything, that's no longer the case. Many of the best savings accounts now have APYs from about 3.5% to over 5%.
However, not all banks offer anywhere near that much. For example, if you stick with a big bank, odds are you'll earn a significantly lower interest rate. Some of them offer as little as 0.01%.
It's a smart move to earn as much interest as possible, but it's even more important when you have a large amount of savings. To demonstrate that, let's look at how much $20,000 in savings will grow, depending on the account you choose.
How much $20,000 earns you in a savings account
Savings account APYs (annual percentage yields) vary quite a bit. The table below shows how much you'd earn in one year depending on your account's APY. It compares APYs of 0.01%, since that's what some big banks offer, the current national average of 0.35%, and a few rates available right now through high-yield savings accounts.
| APY | Interest earned in one year |
| 0.01% | $2 |
| 0.35% | $70 |
| 3.50% | $700 |
| 4.00% | $800 |
| 4.50% | $900 |
| 4.75% | $950 |
| 5.00% | $1000 |
Data source: Author's calculations.
There's no arguing that you lose a lot of money if you keep your savings in the wrong place. You're looking at a difference of several 1,000s between the top savings accounts and those with a subpar to even an average APY.
Why do savings account rates differ so much?
The primary reason why some savings accounts have much higher interest rates is because they're offered by online banks. These banks usually don't have branches you can visit, which saves them money on overhead costs. Banking locations and the staff to run them aren't cheap. Because online banks save in this area, they can pay more interest than brick-and-mortar banks.
Online banks also need to offer those competitive rates to attract and retain customers. Big banks already have established brands and massive customer bases, so they don't need to compete on interest.
This means in-person banking normally isn't an option if you want a high interest rate. Some high-yield savings accounts also don't offer a debit card. You may need to transfer your money to a checking account first to withdraw it. While this isn't always convenient, it's not a huge drawback. After all, savings accounts are designed for storing your savings, not moving money back and forth.
How to maximize your savings
If you don't have a high-yield savings account already, it makes sense to open one. You'll earn much more interest, and there's no downside. Online banks are just as safe, as they offer the same FDIC insurance as the big banks. That covers up to $250,000 per account in the event of bank failure.
There are plenty of high-yield accounts to choose from. While APY is one of the most important features, also look at minimum deposit requirements. Not all accounts have these, but some require a minimum balance to earn the APY. Check for monthly maintenance fees, as well. Most of the top online banks don't charge these, but it's still good to double check.
Once you've found an account you like, you can sign up online. You'll need to provide your address, Social Security number, and possibly a scan of your government-issued ID. The process of opening a bank account online is usually quick and easy. After that, transfer over your savings to start earning interest.
These savings accounts are FDIC insured and could earn you 11x 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 11x 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.
FAQs
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
Is $20,000 dollars in savings good? ›
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
How much will $10,000 make in a high-yield savings account? ›
Putting $10,000 into a savings account with an APY of 5.00% means you could have about $10,511 just one year later. That's more than $500 of free money in just 12 months! Not everyone has $10,000 to put in a savings account, but that doesn't mean you can't still earn impressive interest.
What happens if you put 20k in a high-yield savings account? ›
By keeping your extra savings in a high-yield savings account, you may be able to earn more interest. If you keep $20,000 in a high-yield savings account for one year at 4.50% APY, you can make $900 from interest. The longer you allow your savings to sit in your account, the more interest you'll earn.
How much will $10,000 make in a money market account? ›
The average money market rate is less than 1 percent. But let's say you put $10,000 in an account that earns a full 1% APY. After a year, your balance would earn 100 bucks. Put that same amount in a money market account with a 4% APY, and it would gain just over $400.
How to double 20k quickly? ›
The Best Ways To Double $20,000
- Invest In Real Estate. One of the best ways to double 20,000 dollars is to invest in income-generating real estate. ...
- Start An Online Business. ...
- Invest In Stocks & ETFs. ...
- Invest In Small Businesses. ...
- Start A Service-Based Business. ...
- Try Crypto Investing. ...
- Retail Arbitrage. ...
- Lend Out Your Money.
Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.
Can you ever lose your money with high-yield savings account? ›
If your high-yield savings account is held at a federally insured financial institution, your deposits are protected up to $250,000. But if you have deposits that exceed this limit, you risk losing the additional amount if the bank or credit union fails.
Can you live off of a high-yield savings account? ›
It's possible, but it isn't realistic for everyone. Living off of interest relies on having a large enough balance invested that your regular interest earnings meet your salary needs. Rest assured that you don't need to earn a million dollar paycheck to reach your goal.
Do millionaires use high-yield savings accounts? ›
Millionaires Like High-Yield Savings, but Not as Much as Other Accounts. Usually offering significantly more interest than a traditional savings account, high-yield savings accounts have blown up in popularity among everyone, including millionaires.
4.25% APY: If you invest your $50,000 in a CD or high-yield savings account with a 4.25% interest rate, you will earn $2,125 in interest in one year. 4.5% APY: A 4.5% CD or high-yield savings account will yield $2,250 in interest on your $50,000 investment in one year.
Should I move all my money to a high-yield savings account? ›
Although each financial situation is unique, it doesn't typically make sense for you to keep all of your money in a high-yield savings account.
How much will 100000 make in a high-yield savings account? ›
At a 4.25% annual interest rate, your $100,000 deposit would earn a total of $4,250 in interest over the course of a year if interest compounds annually. Annual total: $104,250.
How much interest does $20,000 earn in a year? ›
How much $20,000 earns you in a savings account
| APY | Interest earned in one year |
|---|
| 3.50% | $700 |
| 4.00% | $800 |
| 4.50% | $900 |
| 4.75% | $950 |
3 more rowsMar 31, 2023
Which Bank Gives 7% Interest Rate? Currently, no banks are offering 7% interest on savings accounts, but some do offer a 7% APY on other products. For example, OnPath Federal Credit Union currently offers a 7% APY on average daily checking account balances up to and under $10,000.
What is the highest paying money market account right now? ›
Best Money Market Account Rates
- Redneck Bank – 4.90% APY.
- First Foundation Bank – 4.90% APY.
- Sallie Mae Bank – 4.65% APY.
- Prime Alliance Bank – 4.50% APY.
- Presidential Bank – 4.37% APY.
- EverBank – 4.30% APY.
- BankUnited – 4.25% APY.
- U.S. Bank – 4.25% APY.
By 30, it would be beneficial to have $50,000 saved. This comes from the goal of being able to replace about 70% to 80% of your pre-retirement income in retirement.”
Is $25,000 in savings good? ›
The median saver has closer to $5,000 in the bank. So if you have $25,000 saved, you're on the good side of the middle by a comfortable margin. That's a lot of cash to leverage — but also a lot to protect. Here's how to utilize, preserve and grow the impressive financial cushion you've built.
How long does it take to save 20 000 dollars? ›
How long will it take to save?
| Savings Goal | If You Saved $200/month | If You Saved $400/month |
|---|
| $20,000 | 100 months | 50 months |
| $30,000 | 150 months | 75 months |
| $40,000 | 200 months | 100 months |
| $50,000 | 250 months | 125 months |
7 more rowsIf you're 30 and wondering how much you should have saved, experts say this is the age where you should have the equivalent of one year's worth of your salary in the bank. So if you're making $50,000, that's the amount of money you should have saved by 30.
