Despite the Fed recently dropping its benchmark interest rate, high-yield savings accounts (HYSAs) are still a great place to park money you’re likely to need in the near future. Unlike stocks, which are at the mercy of market fluctuations, and certificates of deposit (CDs), which penalize you if you pull out your money before the term is up, high-yield savings accounts have virtually no risk and deliver a higher rate of return than traditional savings accounts from brick-and-mortar banks.
How much can you expect to make if you put your nest egg in a HYSA? Let’s look at the numbers.
You can earn $800 or more in 12 months if you put $20,000 in a HYSA
Interest rates have started to drop, but HYSAs are still offering solid annual percentage yields (APYs) between 4.00% and 5.00%, depending on which bank you choose. This means for every $10,000 you put in, you can earn around $400 per year; so $20,000 will earn you $800 in 12 months.
The average rate of return for the S&P 500 in 2024 so far is 15.44%, so you could earn a higher rate of return by investing. But those pesky market fluctuations mean you could also lose money over the short term.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings 
APY 4.10%
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APY 4.10%
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Min. to earn $0 |
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American Express® High Yield Savings 
APY 4.10%
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APY 4.10%
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Min. to earn $0 |
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Discover® Online Savings 
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Min. to earn $0 |
The best place to put money you’re likely to need soon is in a HYSA in most cases. (This means your emergency fund, a house down payment if you’re planning to buy a home soon, or savings for a potential car repair.)
Not sure which savings account is right for you? Click here to learn more about our best high-yield savings accounts — and what APY you can expect.
What about the federal funds rate cut?
If you’ve been following financial news in any way, you’ve probably heard that the Federal Reserve recently cut its benchmark interest rate. That sounds like a big deal, and it is — but the actual percentage was pretty small. The Fed reduced the federal funds rate by 0.50 percentage points, from 5.33% to 4.83%.
Let’s look at what that looks like for $20,000 in a savings account:
| APY | Interest Earned in 1 Year on $20K |
|---|---|
| 4.83% | $966 |
| 5.33% | $1,066 |
Data source: Author’s calculations.
The difference in interest earned between the new and old APYs is $100.
Keep in mind that the interest rate set by the Fed is higher than what most HYSAs offer — they tend to offer a few points less in interest. The Fed interest rate is generally closer to what you can expect to pay if you borrow money.
Consider other options to grow your savings faster
A high-yield savings account is the best place for your emergency fund and cash you plan to need in the next two to three years. The higher interest rate is a nice bonus, but it’s not always the best way to make the most of your savings.
For long-term savings, like retirement or sending the kids to college in 15 years, you’re better off opening a brokerage account and creating a diversified investment portfolio. Diversification reduces your risk by spreading it out over multiple types of investments. If you don’t plan to need the money soon, consider moving some of your savings from a HYSA to an investment account for higher long-term returns.