Here's The Biggest Reason Why I Keep My Emergency Savings in a High-Yield Savings Account (and Why You Should Too)
KEY POINTS
- With an online high-yield savings account, my emergency fund earns over 4% interest (vs. pennies in a regular checking account)
- I still have immediate access to all my cash, anytime I need it
- You don't need to ditch your main bank -- just separate your savings to earn higher interest.
I used to keep all my money in one place -- Chase Bank. It's the same 'ol bank I've been using for years. But when my emergency fund grew past $10,000, I realized I could make way more money in interest by opening an online high-yield savings account (HYSA.)
Don't get me wrong, I still love Chase for everyday checking activities.
But my emergency fund is now earning over 4% interest in an HYSA.
Last year this added up to an extra $798 in my pocket!
Why I switched to an online HYSA
Did you know that online banks can offer rates up to 10 times the national average on savings accounts!? They're lightyears ahead of old-school brick-and-mortar banks, and crush the rates offered for traditional checking accounts.
I'm talking about earning 4%-5% interest, vs. the 0.01% offered at most traditional banks.
When I first learned this, It took me about five minutes to choose a large, reputable online bank and open an HYSA. Once I transferred my savings, interest started accruing (and compounding!) immediately.
It's incredible to see my money grow without any effort, and in 2024 I earned $798 in interest -- for doing nothing.
How much interest can you earn?
The more cash you have in savings, the more potential interest you can earn.
Here's a quick look at how much your savings could grow in a year, at different balances and rates:
| Savings Balance | 0.01% APY (Big Bank) | 4.40% APY (Online HYSA) |
|---|---|---|
| $1,000 | $0.10 | $45 |
| $5,000 | $0.50 | $224 |
| $10,000 | $1 | $448 |
| $20,000 | $2 | $897 |
| $50,000 | $5 | $2,242 |
The APY attached to your bank account makes a massive difference. Cash stored in a plain old checking account earning 0.01% earns you pennies. But with an APY over 4%, you could easily earn hundreds in interest a year -- with no added effort.
Best banks to consider for an HYSA
If you have a large emergency fund (or really any cash in savings) you'll want to move that money ASAP to maximize growth.
Here are a few top HYSA banks I like:
- CIT Platinum Savings -- Best for large balances, CIT has no monthly fees and very competitive rates.
- Capital One 360 Performance Savings -- Best for branch access, if you value in-person banking.
- SoFi Checking and Savings (Member FDIC) -- Best for direct deposit and welcome bonus potential! SoFi® is a great all-in-one solution for everyday banking, and high APYs on savings.
All of these top picks are FDIC-insured organizations -- so you can rest well knowing your cash is protected and safe!
Explore more options: Compare all the top HYSAs right now that offer up to 4.40% APY.
What are you waiting for?
Moving my savings to an online HYSA has paid off big time. Over the years I've earned more than $3,000 in interest on my emergency fund. And you can earn similar money if you make the switch too.
Your mission this week: Check your current interest rate at your bank. If it's less than about 3.60%, it's time to pick a new online HYSA and start earning more interest as soon as possible.
You can still keep your old bank around for everyday checking needs! Just move any bigger amounts of cash savings over to snag that higher interest rate.
Our Research Expert
Joel is a full-time writer at Motley Fool Money, known for his clear, approachable voice on topics like credit cards, savings hacks, and side hustles. He’s been writing about money since 2018 and previously managed editorial content for the How To Money podcast.
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