Why the Average American's Savings Account Is Losing Money

Right now, inflation is around 2.4%. Meanwhile, the average savings account pays just 0.38% APY. (It's even worse for checking accounts which average a pitiful 0.07%.)

Basically, for the average saver, inflation is eating at cash value faster than interest is being earned. This results in a net loss each and every month.

But here's the good news. Simply moving cash from an average account to an above average account means it can outpace inflation and keep growing. Some of the top savings accounts are paying near 4.00% APY -- that's 10x more interest than average!

Why earning less than 1% interest is costing you

Let's break this down with numbers…

If you park $10,000 in a checking account at the national average rate (0.07%), you'll earn about $7 in interest in one year. Not seven percent. Just seven dollars.

In an average savings account at 0.38%, you'd earn about $38.

But inflation at 2.4% would eat away $240 in purchasing power over that same year. So in both cases, your money is worth less at the end of the year.

Earn up to 4.00% with a high-yield savings account

Right now, many of the top high-yield savings accounts (HYSAs) pay upwards of 4.00% APY.

At that rate, your money not only outpaces inflation, it earns meaningful interest on your cash.

Using the same $10,000 example, a 4.00% HYSA would earn you around $400 in a year. Here's a comparison with the average savings and checking interest rates:

Personally, I hold a large cash pile for my emergency savings, and I keep it all in a high-yield account. Last year alone, I earned $798 in interest.

When it makes sense to keep cash in an HYSA

Not all your money needs to live in a high-yield savings account. Checking accounts definitely have their use, too!

But for any cash you're purposefully keeping on the sidelines -- that money should be working as hard as possible for you.

Personally, I treat my HYSA like a financial waiting room. It's not invested, it's not at risk, but it's also not sitting around doing nothing.

Here are a few great uses for an HYSA:

• Emergency fund -- A good rule of thumb is three to six months' worth of essential expenses.
• Short-term savings goals -- Like saving up for a vacation, new car, or wedding. You'll need the money soon, so you want it safe and liquid.
• Large upcoming purchases -- Whether it's a tax bill or a home down payment, parking that money in an HYSA keeps it accessible and growing.
• Buffer cash -- If you're self-employed, seasonal, or just like sleeping better at night, an HYSA can give you extra wiggle room.

Basically, if the money isn't being spent or invested in the near term -- it should live in an HYSA earning a top rate.

Don't settle for average interest. You'll only lose value to inflation over time. Check out today's top high-yield savings accounts and put your money to work!