A savings account is an important way to prepare for big expenses and future goals — even if you start small.
The sooner you start saving, the sooner you can earn interest, money paid over time to your account by the financial institution just for depositing your funds.
Here’s a look at the potential annual earnings of three different savings balances and what you could do with the interest you accrue.
How much interest can you earn on $100?
The national average interest rate for savings is 0.38%, but many national banks pay only 0.01% annual percentage yield (the amount of interest an account earns in a year). If you deposit $100 in one of those savings accounts, you’ll end up with one penny in interest after a year.
The best high-yield savings accounts pay around 4% APY right now. After a year, you’d earn more than $4 in interest on your $100.
The best high-yield savings accounts pay around 4% APY right now. After a year, you’d earn more than $4 in interest on your $100.
What your interest can buy: One cent is not enough money to buy much of anything. But putting your money in a high-yield savings account could leave you enough for a coffee.
A balance of $100 doesn’t earn you much interest either way, but the benefit of using the account with a higher APY is clear: It pays much more than a regular savings account.
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Forbright Bank Growth Savings 
APY
3.85%
Min. balance for APY
$0
Member FDIC
Varo Savings Account 
APY
5.00%
Min. balance for APY
$0
Member FDIC
E*TRADE Premium Savings 
APY
4.00% for 6mo
Min. balance for APY
$0
How much interest can you earn on $1,000?
If you’re able to put away a bigger chunk of money, you’ll earn more interest. Save $1,000 for a year at 0.01% APY, and you’ll end up with $1,000.10. If you put the same $1,000 in a high-yield savings account that pays 4% APY, you could earn about $40 after a year.
What your interest can buy: Ten cents is enough to buy a stick of gum — but $40 will buy a date night meal for two or some shares of stock in certain Fortune 500 companies.
How much interest can you earn on $10,000?
In a savings account earning 0.01%, your balance after a year would be $10,001. Put that $10,000 in a high-yield savings account that earns 4% APY for the same amount of time, and you’ll earn about $400.
What your interest can buy: A dollar is enough to buy a soda — but $400 would get you a new TV or kitchen gadget.
When should you start saving?
Saving whatever you can as soon as you can is best. Instead of waiting for a raise at work or an inheritance, it’s more important (and realistic) to begin building a savings habit as soon as possible.
You can start with whatever you can afford; many savings accounts don’t have a minimum opening deposit requirement.
The sooner you earn interest, the sooner you’ll be able to build on it, thanks to compounding. Compound interest works this way: When interest is calculated and added to your account, the larger balance then earns more interest.
Here’s an example: Say you save $1,000 for a year in an account that pays 4% APY, compounded annually. After 12 months, you’ll have $1,040. Then you’ll start earning interest on $1,040, so after the second year you’ll have about $1,080.
You can calculate what interest you can earn on any balance with a compound interest calculator.
» Ready to start earning interest? Learn more about the best places to save money and earn interest
Choose a savings account that will pay you more
Just as important as saving sooner rather than later is choosing the right savings account. Interest rates at online banks are strong across the board right now.
Having your money in a high-yield savings account can help keep your money accessible while also earning you a higher interest rate than you’d get with a regular savings account. Find out where to put your money now by checking out our favorite high-yield online savings accounts.
