Put $25,000 in a High-Yield Savings Account and Here's What Happens
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Only about 18% of Americans have a high-yield savings account (HYSA), according to a recent CNBC survey. That means the vast majority of people -- 4 out of 5 -- are using low-interest accounts to store their hard-earned cash.
I've spent years writing about personal finance, and this one still baffles me. If you're going to keep cash in the bank, why not earn the most interest possible?
Let's take a look at how much interest $25,000 can earn in a top-tier HYSA today.
Earning interest at 4.00% APY
Right now, many of the best high-yield savings accounts pay around 4.00% APY. Rates do shift over time, but this gives us a good benchmark.
At 4.00% APY, a $25,000 balance would grow like this:
- One year: $1,000 in interest
- One month: About $83
- One day: Roughly $2.75
Compare that to a traditional bank paying 0.01% APY, where $25,000 would generate just $2.50 in an entire year.
The gap is enormous. You can earn more interest in a single day with an HYSA vs. a whole year at a big bank.
Why high-yield savings beats traditional banks
The higher interest rate is the main attraction, but it's not the only good thing about HYSAs. Most top online banks also offer:
- Low or no fees: Most fintech banks have no monthly maintenance fees or minimum balance requirements. Some even waive ATM fees and overdraft charges.
- Better technology: Intuitive apps and online dashboards that make saving simple.
- Fast transfers: Move money to and from your checking account in a day or two.
- FDIC insurance: Just like any name brand bank, online banks offer the same protection for your money up to $250,000 per depositor.
Just because online banks don't have any physical branches, it doesn't mean they are less secure or don't offer as many features. You still get all the same benefits as a brick-and-mortar bank, but with more modern tech and way more interest.
A really strong pick right now is SoFi Checking and Savings (Member FDIC). One app for checking and high-yield savings, no account fees, and up to 4.50% annual percentage yield (APY) with direct deposit. See our full review here to learn more.
SoFi Checking and Savings
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- Competitive APY on both Savings and Checking
- No monthly account fee
- Welcome bonus up to $300 (direct deposit required)
- ATM access
- Unlimited number of external transfers (up to daily transaction limits)
- FDIC insured (up to $3M with opt-in to SoFi Insured Deposit Program)
- Early access to direct deposits
- Tools to help you track savings goals
- Combo account only; no stand-alone savings or checking
- Maximum Savings APY requires direct deposit
- No branch access; online only
- Overdraft protection requires monthly direct deposit minimum
For those who plan to set up direct deposit with their new account, we think SoFi Checking and Savings (Member FDIC) is hard to beat. Not only does this savings account offer a strong APY, but the linked checking account earns an above-average rate, too -- which is a rare perk. Plus, new customers earn a bonus of up to $300 with eligible direct deposit. Frankly, it's the kind of combo that could make it worthwhile to switch banking relationships.
When an HYSA makes the most sense
Checking accounts are perfect for everyday spending, like for groceries, bills, and getting paychecks deposited.
But a high-yield savings account is built for short- and medium-term goals.
Here are a few examples:
- Emergency funds
- Saving for a vacation or large purchase within the next year
- Holding a down payment while shopping for a home
- Parking money you might need soon but don't want tied up in investments
Another option worth considering is certificates of deposit (CDs). These work best for money you definitely don't need in the short term, and you want to lock in a set interest rate. Today's top CDs also pay upwards of 4.00% APY.
Make your money work harder today
If you're part of the 4 in 5 Americans without an HYSA, it may be time to reconsider where you keep your cash pile.
Especially if you have $25,000 (or more) earning pennies currently. Opening an HYSA means you'll start earning meaningful interest on your money, without any extra effort or risk.
Your money deserves more than pennies.
Check out our list of the best high-yield savings accounts and start making your savings work harder today.
Our Research Expert
Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.