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When should you open a high-yield savings account?

A high-yield savings account is worth opening when interest rates are high.  Hero Images Inc/Getty Images

In an economic climate grappling with stubborn inflation and volatility in the stock market and banking sector, many Americans find themselves looking for practical ways to safeguard their money. Fortunately, there are multiple ways to both save money and make ends meet.

This can take two primary forms: a high-yield savings account and/or a certificate of deposit (CD) account. Both types offer unique advantages that many would find helpful, including higher interest rates and more robust protections for the account holder's money. Like all financial products, however, it helps to get the timing right to get the most out of an account.

So when should you open a high-yield savings account? That's what we will discuss in this article.

Explore your high-yield savings account options here now and see how much you could be earning or use the table below to explore some local options.

When should you open a high-yield savings account?

A high-yield savings account can be advantageous to have at many points, but there are generally better times to open an account. Here are three times you should strongly consider opening a high-yield savings account.

When interest rates are high

While interest rate hikes have been bad for prospective homebuyers or homeowners looking to refinance, they're beneficial for those looking to open a high-yield savings or CD account. Considering the current rate environment, now is an excellent time to open a high-yield account. Simply compare what you're earning with a regular savings account (think 0.33%, approximately) to what you can be making with a high-yield account (3.5% to 4.5% or more). 

Just make sure to shop around before committing to one specific lender or institution. By doing your research, you'll improve your chances of finding the highest-rate account out there. But make sure to look at the fine print, too. Some accounts come with fees and penalties that may eat into your potential interest. Ideally, you can find an account with high interest rates and minimal fees.

Start searching for high-yield savings accounts here now or compare your options by using the table below.

When you want to build an emergency fund

If you're concerned about how much you have saved for a rainy day, a high-yield savings account can help. Most experts recommend having at least three to six months of income saved in the event of a job loss or other unexpected emergency. While this can be difficult for many people, a high-yield savings account can help.

Because these accounts earn more interest than traditional accounts, you'll quickly start building up your savings. And once that interest is earned, you'll be able to compound it by earning additional interest on what you've already made. All of this makes opening a high-yield savings account particularly attractive if you're looking to build an emergency fund. It won't happen overnight, but you'll achieve your goal much quicker with this sort of account than you would with most others. 

When you want risk-free growth

Sure, you can make significantly more money by investing your money in the stock market instead of a high-yield account. You can also lose it all. Trillions in retirement savings were wiped out in 2022 amid inflation and poor market performance. The projections for stock performance amid the recent volatility in the banking sector don't look promising, either.

But with a high-yield savings account, you can enjoy risk-free growth. Granted, interest rates on these accounts fluctuate, so you may see your interest change over time, but you won't lose money. You'll just earn less interest. Your principle will remain unchanged (assuming you don't make any withdrawals). The promise of security and risk-free growth for your money is always attractive, particularly in today's economic climate.

The bottom line

High-yield savings accounts generally offer higher interest rates than regular accounts, but they're particularly helpful to open now when interest rates are higher than they have been in recent years. It's also good to open when you're looking for a way to build an emergency fund and when you're looking for stable, risk-free growth.

Learn more about your high-yield savings account options here to see if it's right for you.

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