Here’s How Much Money You Can Make With $5K in a High-Yield Savings Account

These days, it’s a pretty difficult thing to save any money at all, let alone $5,000. Grocery prices are up, utility costs have risen, and rents are just plain through the roof.

But maybe through a combination of hard work and careful spending, you’re in a place where you’ve managed to save $5,000. If so, you should be proud, since that’s not easy to do. But you should also do what you can to make your money work for you. And to that end, it pays to consider putting it into a high-yield savings account.

Savings account rates are up these days following a series of federal funds rate hikes on the part of the Federal Reserve that took place in 2022 and 2023. The Fed had to raise the benchmark rate to slow the pace of inflation, and believe it or not, that tactic worked.

Granted, it may not seem as if price increases have cooled given how expensive life is. But the data tells us that the Fed’s rate hikes have helped. So now, as a saver, you have the potential to benefit.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.25% Rate info Circle with letter I in it. 4.25% annual percentage yield as of July 24, 2024 Member FDIC.	APY 4.25% Rate info Circle with letter I in it. 4.25% annual percentage yield as of July 24, 2024	Min. to earn $1
UFB Secure Savings Account APY 5.25% Rate info Circle with letter I in it. To ensure you keep getting the highest rate at UFB, you’ll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts. Member FDIC.	APY 5.25% Rate info Circle with letter I in it. To ensure you keep getting the highest rate at UFB, you’ll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts.	Min. to earn $0
Western Alliance Bank High-Yield Savings Premier APY 5.31% Rate info Circle with letter I in it. 5.31% annual percentage yield (APY) is accurate as of 7/11/2024 and subject to change at the Bank’s discretion. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Member FDIC.	APY 5.31% Rate info Circle with letter I in it. 5.31% annual percentage yield (APY) is accurate as of 7/11/2024 and subject to change at the Bank’s discretion. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	Min. to earn $500 to open, $0.01 for max APY

How much interest can you earn on $5,000?

The amount of interest you can earn on a $5,000 deposit depends on the bank you choose. Many banks are offering savings account APYs in the 4% range, with some even hitting the 5% mark. CIT Bank, for example, is offering a 5.00% APY for balances of $5,000 or more.

If you’re able to snag a 5% APY, you could potentially be looking at earning $250 in interest over the course of the next 12 months. That’s not a small amount of money. And best of all, if you open a savings account at a bank that’s FDIC-insured, you might earn that $250 in a completely risk-free manner, since your deposit will be protected in the event of a bank failure.

Savings account rates aren’t set in stone

A $5,000 deposit in a high-yield savings account today might earn you $250 in interest over the next year. But that’s not guaranteed for one big reason: Savings account rates aren’t set in stone. If you want to guarantee yourself $250 in interest on a $5,000 deposit, what you’ll need to do is open a 12-month CD with a 5% APY.

The good news is that because CD rates are up these days, a 5% APY isn’t hard to find (whereas for a savings account, it’s on the higher end). And with a CD, you get to lock in your rate so even if market conditions change, your deposit and APY are protected.

That’s an important thing right now. We just talked about the Fed’s tactic of raising rates to cool inflation. Well, because inflation has come down, the Fed is now talking about cutting rates before the end of the year.

Once that happens, we’re likely to see savings account and CD rates come down — since the federal funds rate impacts consumer interest rates, too. So if there’s a specific amount of interest you’re looking to earn on your money, your best bet is to choose a CD over a savings account so you’re able to lock that rate in.

Granted, the Fed’s interest rate cuts are expected to be gradual, so we shouldn’t expect savings account and CD rates to plunge overnight. But at this point, it’s pretty fair to say that these rates are currently at a high and will only go down.

So while you could opt to put your $5,000 into a savings account, and you might still earn a nice amount of interest even if rates start to fall, a CD might give you a higher payout at the end of the day.

These savings accounts are FDIC insured and could earn you 14x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 14x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.