One easy way to grow your savings faster
One of the first money lessons you learned growing up is likely the importance of putting aside money for the future. But you've graduated from your piggy bank days, and now it's time to make the most of your money by being smart about where you save it.
Whether you're saving for a rainy day or a big purchase like a new car, the more you can grow your savings, the better. And if you can do it with minimal effort on your part, that's better yet.
Trimming your budget, working a second job and selling your unused stuff can all help you increase your savings, but you may be missing one quick, simple strategy that can grow your earnings up to 10 times faster (or more).
Find out how much more you could be earning here now!
One easy way to grow your savings faster
So, what is this quick, simple strategy? Opening a high-yield savings account.
A high-yield savings account works just like a regular savings account. You deposit money into the account, and the bank pays you interest on your balance. The key difference is the interest rate you earn.
With a high-yield savings account, you can earn significantly more interest, meaning your money grows faster over time. Consider that interest rates on regular savings accounts are currently around 0.42%, according to the FDIC. Some of the top high-yield accounts, on the other hand, give you 4% to 5%, according to Bankrate data. That difference can really add up.
For example, say you have $2,000 in a regular savings account with an interest rate of 0.42%. After 12 months, you'd earn $8.40 in interest on this balance. But in a high-yield account at a 5% interest rate, you'd earn $100 on the same amount over the same 12 months. The more you save and the longer you keep your money in the account, the faster this interest grows.
See today's top savings rates online now and start growing your savings faster.
Additional benefits of high-yield savings accounts
In addition to much greater earnings, high-yield savings accounts also offer:
- Low risk: Savings accounts are a safe place to store your money, thanks to federal deposit insurance. When you open an account at an FDIC-insured bank (or NCUA-insured credit union), your funds are protected up to $250,000 per account per institution if the bank goes under. That's welcome news given this year's big bank failures.
- Low or no fees: Maintenance and other fees can chip away at your savings. Many high-yield savings accounts are offered by online banks, which have much lower overhead than traditional banks that maintain physical locations. As a result, online banks don't need to collect as much in fees, so many offer low fees or waive fees altogether.
- Straightforward process: Opening a high-yield savings account is as simple as filling out an application online (or visiting your local branch, if you prefer and if your bank has them). Compared to other methods of growing your savings, it's about as fast as you can get.
- Accessibility: Many high-yield savings accounts — even those provided by online banks — give you a debit card you can use to easily withdraw money when you need it. Getting your money out of other savings vehicles, such as CDs, can take more time and may even incur penalty fees if you do it too early.
Other ways to grow your savings faster
You can also boost your savings by:
- Shopping around: Not all high-yield savings accounts are created equal. So take the time to compare several accounts. Look at their interest rates, fees and any other restrictions before choosing one to open. Remember that the highest interest rate may not always be the best option if there are high fees or strict requirements that eat away at your earning.
- Choose an online bank: In addition to low or no fees, online banks also offer some of the highest interest rates available. They provide convenient, 24/7 account access, and many have large ATM networks just like regular banks do. Unless it's essential to you to be able to visit a branch in person, an online bank is the clear winner.
- Set up automatic deposits: To maximize the benefits of a high-yield savings account, make sure to keep adding to your balance regularly. The more you save, the more interest you'll earn. Consider setting up automatic deposits from your paycheck to your savings account so you don't forget to make contributions or end up spending the money elsewhere before you can save it.
Start by comparing top high-yield savings account options here.
The bottom line
Opening a high-yield savings account is a smart move for anyone looking to grow their savings faster. By earning a higher interest rate, you can see your money grow significantly over time, and the only work you have to do is finding and opening an account. In a sea of financial decisions that can often feel complicated and overwhelming, it's a no-brainer.
