Watch CBS News

Is a $5,000 deposit into a high-yield savings account worth it?

Depositing $5,000 into a high-yield savings account may be worthwhile.  Getty Images

Are you looking for a safe home for your savings that produces a reasonable return? If so, you may have come across high-yield savings accounts. Unlike traditional savings accounts that only currently offer a 0.45% average annual return, today's high-yield savings accounts can pay interest in excess of 5% annually

That's important in today's economic environment in which persistent inflation continues to drive the cost of goods and services up. 

So, what if you have $5,000 in savings and want a safe place to store it that provides strong returns? Is it worth it to deposit that $5,000 into a high-yield savings account?

Compare leading high-yield savings accounts now

Is a $5,000 deposit into a high-yield savings account worth it?

If you have $5,000 in savings, it may be wise to deposit it into a high-yield savings account. As mentioned above, some leading high–yield savings accounts currently offer returns over 5% annually. And, while these accounts typically come with variable interest rates that will change with time, $5,000 at 5% will produce $250 in passive income over the course of a year (should the rate stay the same). But, that's not the only reason it may be worth depositing $5,000 into a high-yield savings account. Some other reasons to do so include: 

Your returns can beat inflation

The current inflation rate is 3.4% and returns on many deposit accounts fail to keep up. That means these deposit accounts could lead to a loss of buying power. But, that's not necessarily the case with a high-yield savings account. 

Some of the best high-yield savings accounts today come with interest rates ranging from 4.25% to 5.25%. No matter where your account lands on that range, it will produce a return that's ahead of the current inflation rate. So, instead of letting your money lose buying power, you can increase the power of your $5,000 in savings by depositing it into a leading high-yield savings account. 

Earn an inflation-beating return with a high-yield savings account today

You'll maintain liquidity

In some cases, you'll have to give up liquidity if you want to earn a reasonable return. For example, if you opt for a certificate of deposit (CD), you'll need to keep your money in the account for its entire term - or pay an early withdrawal penalty to access it sooner. But that's not the case with high-yield savings accounts. 

Most high-yield savings accounts are readily accessible when you need your money. But, there's a caveat to consider. Like most traditional savings accounts, you'll typically be limited to six withdrawals per month when you opt for a high-yield savings account. And, you may have to pay a penalty if you need to tap into your savings more than that in any month. 

Other options don't offer such high returns

As you search for a place to store your $5,000 in savings, you'll likely come across multiple options. But, other options don't typically offer such high returns. For example, traditional savings accounts are only paying an average of 0.45% per year in interest right now. And, the average annual return on a money market account is just 0.68%, according to the FDIC. Those returns are minimal when compared to the returns in excess of 5% that some high-yield savings accounts come with. 

You could get a sign-up bonus

Sign-up bonuses can expand the returns you earn on your savings. And, some high-yield savings accounts offer these bonuses to attract new customers. So, when you open a high-yield savings account, you may be able to get one of these bonuses, expanding your potential earnings. 

See how much you could earn with a high-yield savings account today

The bottom line

A high-yield savings account can be an effective way to store your savings. That's especially true if you have $5,000 that you'd like to earn a meaningful return on. Returns on these accounts don't just beat many other options, they can beat inflation, giving you the opportunity to expand the buying power of your savings - rather than lose it. At the same time, you'll maintain the liquidity of your money and you may even qualify for a sign-up bonus. Compare your high-yield savings account options now

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.