Here's How Long It Takes for Your Savings Account to Double Due to Interest

Putting money into a high-yield savings account is a smart thing to do. High-yield accounts provide competitive rates for savings, present no risk of loss if they are FDIC insured, and enable you to access your money whenever you need it.

While you won't get the same returns you could get by opening a brokerage account and buying stocks, it is still important to understand how much your savings actually can earn for you. Fortunately, there's an easy way to figure that out. Here's how to do it.

The Rule of 72 will help you determine your doubling time

There's a really fast and simple way to get an estimate of how long it is going to take for your money to double. It's called the Rule of 72, and here's how it works:

• Determine your expected rate of return. You can find this out from your savings account provider. For example, a high-yield savings account might have a rate of 4.00%, while a more traditional savings account might have a yield of 0.5%.
• Divide the number 72 by your expected rate of return.

For example, if your account paid 4% interest, you could estimate the time it would take for money invested in it to double by dividing 72 by 4. In this case, it would take about 18 years to double your money.

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So how long will it take your account to double?

The interest rate you earn is going to play a major role in determining how long your doubling time is. For example, the table below shows approximately how long it would take to grow an investment into double its original size.

Obviously, you do not want to wait 144 years for your money to double, so you should aim to find a savings account with the highest rate possible. To do this:

• Check out savings accounts offered by online banks, which tend to provide a higher rate than most traditional savings accounts at brick-and-mortar banks do.
• Compare savings account rates from multiple lenders to see which is the most competitive.
• Understand the rules, such as whether a bank will pay the same rate for all deposits regardless of the size or your account balance.
• Consider changing bank account providers over time as rates fluctuate.

By taking these steps, you can get the best rate possible for your savings. You can also look into a certificate of deposit if you'll need the money in the short-term but not immediately. CDs are also FDIC insured and provide a guaranteed rate of return, which is often a little higher than the rate a savings account would offer. You must agree to keep your money invested for a specific period of time, though, such as six months or a year, so consider whether that makes sense for your situation.

It's also important to remember that even a savings account that pays a pretty competitive rate won't allow you to double your money very quickly. This is why these accounts are meant for money you don't want to risk in the stock market.

If you have time to wait out any potential downturns because you won't need the money for around five years or so, you're better off putting your funds into a brokerage account where they can double much faster.