What should I be looking for in a high-yield savings account?

August 16, 2021 | By Jessica Goedtel, CFP®

Are you looking for a place to stash your emergency fund and earn more than a few pennies on your hard-earned savings? Move that money out of your boring checking account and instead switch over to a high-yield savings account, where you can earn dozens of pennies! Dozens!

In all seriousness, a high-yield savings account isn’t going to make you rich overnight – or ever, really. But they do earn more than most checking and regular savings accounts. More importantly, they provide a safe place for your money and still accessible within a few days if you have an emergency.

So which ones are the best? Here are some things to keep in mind when looking for right account for you:

Free. There are many free high-yield savings accounts out there. Avoid paying unnecessary fees, and look for accounts with no minimum balance.
Interest rate. As of this blog post (August 2021), average interest rates on high-yield savings accounts are around .40-.50%. There are higher rates out there, but there is usually some kind of trade-off (minimum balance, rate is for a limited term, etc.).
- A note on interest rates: Even though rates are fairly low right now, interest rates on high-yield savings accounts are dynamic – meaning the rates will go up and down, unlike a CD where you are locked into a fixed rate for a set period of time.
FDIC Insured. FDIC deposit insurance protects you in case of bank failure (yes, it happens although usually with smaller banks). The FDIC will insure your deposit up to $250k. Most high-yield savings accounts will have this coverage (but money market savings will not).
Interface. Most high-yield savings that pay a decent interest rate are online, so having a site that is easy to use and understand is important.
Goals. I’m a huge fan of having separate savings accounts for different goals (such as one for emergency savings, travel fund, or car down payment). Having the ability to create a separate account for each goal, or being able to earmark specific is a great way to stay focused on your savings targets.

My personal favorites are Ally, American Express, and Capital One Performance Savings (in no particular order)*, but there are plenty of great options out there. Find the account that works best for you and gets you motivated to keep working towards your savings goals.

*Pavilion Financial Planning has no affiliation with any of these institutions and receives no compensation from them.

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