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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.