Here's How Much Interest You Can Earn on $5,000 in Savings

Savings accounts are great places to put money aside. Whether you're saving for a specific goal or want extra cash to cushion you against the unexpected, $5,000 is a solid amount of savings. As to how much interest you can earn, that depends on what account it's in.

The annual percentage yields (APYs) on savings accounts can vary wildly, from a fraction of a percent all the way up to about 5%. As such, if you've got $5,000 in savings, it's worth putting it in a top high-yield savings account that pays above-average rates. It can translate into hundreds of extra dollars in interest each year.

Savings accounts vs. high-yield savings accounts

The average APY on a savings account is 0.41%, according to the FDIC. That's the average -- some banks pay APYs of 0.01% or less. Even worse? They may charge you a monthly fee, as well.

In contrast, some top CDs or high-yield savings accounts will pay APYs of 4% or even 5%. That's eight or nine times the average rate. Plus, many of the best HYSAs will not charge maintenance fees.

Here's how that can impact your earnings:

As the name suggests, high-yield savings accounts pay higher interest rates than regular ones. They are usually offered by online-only banks and often don't have as many bells and whistles as traditional accounts. For example, unlike many HYSAs, a traditional savings account might let you do your banking in person or access your money more easily.

If you do most of your banking online, it's worth considering a high-yield account. Some high-yield savings accounts, such as the UFB Portfolio Savings Account, even combine high APYs with the convenience of an ATM card. Click here to learn about its competitive rates and open an account.

How to boost your savings

A savings balance of $5,000 puts you ahead of many Americans. But there's no "right" amount of savings -- it depends on your life situation. The ideal scenario is to set aside three to six months' worth of living expenses.

That way you'll have a financial cushion if life throws you a curveball and you lose your job or face a medical emergency. Someone with no dependents and several income streams will likely need less savings than a person with heavy financial commitments.

If your savings aren't where you want them to be, there are a few steps you can take.

Review your spending

Check over your recent bank statements to see where your money goes. That knowledge can help you make decisions about how you spend your money. If you're not sure where to start, budgeting apps can be useful tools.

Cut subscriptions you're not using

If you haven't looked at your spending in a while, you might be surprised at how many automatic payments have crept in. Look for subscriptions you barely use or other spending that perhaps isn't giving you value. For example, the last time I looked at my budget, my takeout costs had crept to unnecessary levels.

Set savings goals

The easier you make it, the more likely you are to save. Use your spending review to see how much you can realistically save. That target means you won't have to think about how much you'll put aside. You can also set up automatic transfers to your savings account.

Take on a side hustle

If you find you have very little spare money to save or invest, you have two options. You can cut spending to free up some cash. Or you can take on a side hustle or extra hours at work to increase your income. Put any extra earnings toward your savings goals.

Maximize your savings interest

If you have $5,000 sitting in a traditional savings account, you could be missing out on hundreds of dollars in interest payments each year. That's money that you could be using to have fun or put toward wealth building.

It only takes a few minutes to open an account online and transfer your funds. If you want to boost your savings balance even more, consider setting up automatic contributions from your checking account.