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Some new year’s resolutions, like new diets and exercise routines, demand daily attention and energy, but here’s at least one that can take less than 15 minutes: opening a high-yield savings account.
Nearly a third of Americans say they’re saving more during the pandemic than before, according to a 2021 survey by NerdWallet and Marcus by Goldman Sachs. About 22% of American savers had opened a savings account at an online-only bank since the pandemic began. Online-only banks tend to have high-yield accounts.
Here’s how a high rate can help you achieve savings goals — and why opening a high-yield account is a good use of a few commercial breaks.
» Find high rates: NerdWallet’s best high-yield online savings accounts
1. You’ll save more money faster
Big changes to your finances, such as paying off debt or getting a raise, play a serious role in being able to save more money over time. But where you keep your savings also matters.
Investments in the stock market have the highest long-term average returns — around 7% to 8% after inflation — but the market isn’t best for money you may need to access within a few years since returns fluctuate and there’s a risk of losing that money.
"A high-yield savings account is one of your best bets outside of the stock market,” says Maggie Germano, a Syracuse, New York-based financial coach for women nationwide. “Rates will almost certainly climb again once we emerge from the pandemic and things stabilize.”
Germano recommends stashing emergency savings, meaning several months’ worth of living expenses, into an account that’s easy to access. Any regular savings account could work, but a high-yield account has the added advantage of earning at least eight times more interest than the national average rate for savings accounts, 0.13%.
For example, keeping $10,000 in a savings account with an annual percentage yield, or APY, of 0.06% earns $6 in interest after 12 months. In contrast, leave $10,000 in an account with a 0.50% APY and you earn $50 after a year. It’s not life-changing, but it’s something. And that’s before factoring in money you add to the account throughout the year.
» Want to put aside more cash? Here’s how to save more money
2. You’ll avoid more fees
Savings accounts at traditional brick-and-mortar banks tend to have a monthly fee or requirements such as maintaining a certain balance to waive that fee.
“At my old bank, I had to have $2,500 in my savings account to not get charged a monthly fee,” Germano says. “Make sure you’re using a bank that actually works for you.”
High-yield accounts are generally free with no strings attached. They’re usually offered by online banks and credit unions, which don’t have the overhead of maintaining branches and pass some of that savings on to customers in the form of higher rates and fewer fees.
Even a $5 monthly fee adds up, and you don’t want to lose money in an account that’s supposed to help build your savings.
3. They have helpful account features
Some online banks let you open multiple savings accounts with low or no minimum balances. Ally and Capital One, for example, also let you nickname your accounts, so you can save up for different goals easily. And if you set up automatic transfers from your checking account or split direct deposits from your paycheck, you can save consistently without having to think about it.
» See our list of banks that allow multiple savings accounts
Other high rates to consider
A savings account is the most common place to find solid interest rates, but it’s not the only one. See these alternatives:
Rewards checking accounts: Some banks have checking accounts with surprisingly good rates, but be sure you can satisfy any monthly transaction requirements.
High-yield certificates of deposit: Early withdrawal penalties can make CDs less attractive than regular savings accounts, but if you have a sum that you won’t touch for a few years, look into CDs. They can have some of the highest rates among bank accounts.
» Learn more about the best high-interest accounts
Start the new year with effortless saving
A high-yield account is no substitute for regular savings contributions. But it can give you a boost for your savings, and that stays true even if your interest rate doesn’t stay the same.
If your rate drops, and many did during the pandemic, “it’s normal to be frustrated and a little nervous,” Germano says. "But try not to make big decisions.”
“Interest rates and the stock market change all the time,” Germano noted via email. “When the economy is more stable, things tend to trend back upward.”
Opening a high-yield account can be your ticket to more savings. And that’s one new year’s resolution you can knock off your list early.