This Is How Much Money You Can Make with $20K in a High-Yield Savings Account
KEY POINTS
- By keeping your extra savings in a high-yield savings account, you may be able to earn more interest.
- If you keep $20,000 in a high-yield savings account for one year at 4.50% APY, you can make $900 from interest.
- The longer you allow your savings to sit in your account, the more interest you'll earn.
It is valuable to have savings. If you have extra cash in an emergency fund, it'll be easier to pay for unanticipated expenses that come your way. The recommended amount to save varies from person to person, as everyone's financial situation differs.
But for many people, $20,000 is a sizable emergency fund goal that will go far. If you have a large chunk of savings set aside, make sure you keep it in a bank account that earns interest.
Curious how much interest you can make off $20,000? Below, I'll explain how much you can earn with this sum by keeping your cash in a high-yield savings account.
Maximize your earnings with a high-yield savings account
Before opening a savings account, check the annual percentage yield (APY). Banks use this to describe the returns an account holder can expect by keeping their cash in a savings account for one year. Many brick-and-mortar banks offer low APYs, so it's common to see rates as low as 0.01% APY. At that meager rate, you won't earn much at all.
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 6, 2024. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.90%
Rate info
3.90% annual percentage yield as of December 6, 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. |
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. |
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. |
But if you open a high-yield savings account, you'll likely be offered a much higher APY. Many online banks offer 4.00% APY or higher for these accounts. How much interest will you earn by keeping $20,000 in a high-yield savings account? It could be more than you think.
$20,000 in savings accumulates this much in interest
To determine how much interest you'll earn, multiply your initial deposit ($20,000) by the APY your bank account offers. Doing this will show you how much you'd make if you kept your cash in the bank for one year.
For the following calculations, I went with a 0.01% APY for a standard savings account and a 4.50% APY for a high-yield savings account. The bank accounts on our list of the best high-yield savings accounts have APYs ranging from 4.15% to 5.05% -- I settled somewhere in between.
These calculations assume a $20,000 deposit with no additional deposits made to your account:
Bank account type | Interest earned after one year |
---|---|
Savings Account, 0.01% APY | $2.00 |
High-Yield Savings Account, 4.50% APY | $900 |
As you can see, there is a significant difference in earnings. Keeping a large sum of cash like this in a high-yield savings account would be worthwhile if you hope to maximize the interest you earn.
Compound interest is on your side when it comes to savings
The calculations above show how much interest you can earn by keeping $20,000 in the bank for a year. But you can make more money thanks to compound interest, which is interest that you earn on interest. The longer you keep your money in your savings account, the more you earn.
To give you an idea how you can benefit from compound interest when you have a savings account, here's how much money you'll make if you keep $20,000 in a high-yield savings account for anywhere from one to five years. Again, the following calculations assume you make no additional contributions beyond the initial deposit.
Here's a breakdown:
Year | Starting balance | Interest earned | Ending balance |
---|---|---|---|
1 | $20,000 | $900 | $20,900 |
2 | $20,900 | $940.50 | $21,840.50 |
3 | $21,840.50 | $982.82 | $22,823.32 |
4 | $22,823.32 | $1,027.05 | $23,850.37 |
5 | $23,850.37 | $1,073.27 | $24,923.64 |
That's $4,923.64 -- nearly an additional $5,000 earned in five years, assuming the APY doesn't change. However, APYs can and do change, so your APY likely won't stay at the same rate for five years.
Earn more interest with no extra work
Considering the rates offered, now is an excellent time to open a high-yield savings account. By stashing your cash in a bank account with a higher APY, you can earn more interest without doing any work. Most bank accounts take only a few minutes to open, so it's worth the effort. You can improve your personal finances by boosting your bank account balance with earned interest.
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