These 4 Savings Accounts Could Generate Better Returns Than Stocks This Year

At the beginning of the COVID-19 pandemic, the Federal Reserve reduced interest rates to record lows in order to stimulate the economy. That meant even high-yield savings accounts were paying extremely low APYs. Today, it is a different story. After months of aggressive rate hike action, the interest rates on some of the best savings accounts are not to be sniffed at.

In contrast, the stock market struggled in 2022 and may do so again in 2023. The S&P 500 fell by almost 20% last year, and many investors saw the value of their portfolios drop dramatically. We don't know what will happen this year. Some analysts argue that consecutive years of decline are rare, while others are concerned about a potential recession. If markets are flat or decline, many savings accounts could again outperform the stock market.

Four high yield savings accounts that could beat the stock market

The combination of high interest rates and economist warnings of low stock market returns adds to the appeal of savings accounts, certificates of deposits, and money market accounts. Not only are they FDIC insured, but some also pay APYs of 4% or more. Sadly, it's still not enough to beat inflation, but that's another story. Here are four to have on your radar.

1. CIT Savings Connect

The CIT Savings Connect is a solid, easy-to-use, high-interest savings account. There's a $100 minimum deposit to earn the 4.20% APY. Plus, you can combine the account with CIT's eChecking account so it's easier to manage your money.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.90% Rate info 3.90% annual percentage yield as of December 11, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.90% Rate info 3.90% annual percentage yield as of December 11, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

READ MORE: Best High-Yield Savings Accounts

2. Marcus by Goldman Sachs Online Savings Account

Unlike several other accounts with an above average APY, there are no minimum balance requirements on the Marcus by Goldman Sachs Online Savings Account. You can earn the 4.10% APY no matter how much you have in your account. On the downside, it doesn't have features such as an ATM card or mobile check deposit.

3. First Foundation Bank Online Savings

First Foundation Bank Online Savings pays an impressive APY of 4.75%. It also comes with an ATM card and mobile app, giving you more flexibility in how you access and deposit your savings. The only catch is that you'll need to maintain a $1,000 minimum deposit to qualify for the high APY.

4. Upgrade Premier Savings

Upgrade Premier Savings also requires a minimum deposit of $1,000 or more for its 4.41% APY. It doesn't have as much functionality as some of the other savings accounts, though. For example, you won't get an ATM card and need to transfer money to a checking account if you want to spend it.

Savings accounts still won't make you rich

It's true that certain savings products might beat equities this year. But that's not the whole picture. If you want to build wealth, it's not a question of what will generate better returns this year. The trick is to look for assets that will generate better returns in the coming decade or more. Investing consistently over time is a proven way to build wealth.

Savings and investments play different roles. Savings accounts are designed for money you don't want to take risks with or might want to access in the short term, such as your emergency fund. Investing is about building assets that might increase in value over a longer term horizon. In an ideal world, you'll have both: Savings for cash you need in the coming few years and money in a brokerage account to build wealth over time.

Don't underestimate the importance of consistent investing

The stock market may fall further this year and we may enter a recession. But we don't know when (or if) that might happen, nor when it will start to recover. If your wealth-building money is in a savings account earning a 4% APY when the stock market turns upward, you won't benefit from the recovery.

Historically, over time, money invested in the S&P 500 has generated higher returns than money left in a savings account. The average return on the stock market between 2012 and 2021 was 14.8% annually, per The Motley Fool. That includes some years where it fell and others where it performed extraordinarily well.

Even with a good APY, a savings account will only go so far. To give you a very back-of-the-envelope calculation, if you had $1,000 in a savings account that earned 4%, it would generate $40 in your first year. Even if you continued to earn 4% (which is unlikely as rates fluctuate) and compound the returns, after 10 years it would be worth almost $1,500.

In contrast, if you invest $1,000 in the stock market, you could hope to earn an annual return of 7% or more on average. Compound interest -- earning interest on your interest -- means that in 10 years it might be worth almost $2,000. With more time, the difference between saving and investing becomes even greater.

Bottom line

After several years of near zero returns on savings, it is good to see these accounts offering higher APYs. But once you have a well-stocked emergency fund and are on top of any other savings goals, don't neglect your investments. Economic uncertainty and constant talk of recession makes it tempting to stick with safe savings accounts that pay OK returns. Unfortunately, if you want to build wealth, your savings will only take you so far.