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- High-yield savings accounts and certificates of deposit (CDs) provide excellent options for maximizing savings.
- High-yield savings accounts offer flexibility and higher interest rates compared to traditional savings accounts.
- CDs offer a stable, guaranteed interest rate for a set term, suitable for medium to long-term savings goals.
Determining where to put your hard-earned money can be challenging. It's easy to look at all the available options, get overwhelmed, and leave your cash where it is.
If you need help deciding which high-yield savings accounts to utilize right now, here are a couple that could be a good choice and one way to maximize your returns.
High-Yield Savings Accounts
Unlike a traditional savings account with your bank, many online savings accounts offer much higher interest rates. For example, my bank has a savings account with an annual percentage yield (APY) of just 0.01%. Meanwhile, some high-yield savings accounts offer APYs of 5.00% or higher, making them a more attractive option than keeping money in financial stocks.
These online savings accounts are a great choice because they work just like any other savings account, allowing you to transfer money between accounts and withdraw your money without penalty (note that some may impose a per-month transaction limit).
Our Picks for the Best High-Yield Savings Accounts of 2024:
- American Express® High Yield Savings
- CIT Platinum Savings
- UFB Portfolio Savings Account
The one drawback of high-yield savings accounts is that their interest rates can change. If the Federal Reserve cuts interest rates soon, which it could do as early as next month, savings account APYs will likely fall as well.
Still, high-yield savings accounts will likely continue paying higher rates than traditional bank accounts. That makes them a great place to store your emergency fund, cash for an upcoming vacation, or money for the kids' back-to-school supplies.
Certificates of Deposit
Another good high-yield savings choice is certificates of deposit (CDs). CDs involve locking up your money for a set period and, in return, receiving a (mostly) guaranteed APY return on your deposit.
For example, if you have $5,000 and put it in a 3-year CD paying an APY of 4.00%, you'll earn $624 in interest.
CDs are suitable for some people because the interest rate doesn't change for the entire term, providing the peace of mind of earning a predetermined amount in an FDIC-insured account.
One major drawback to CDs is that you usually have to pay a fee to withdraw your money early. The fee is typically equivalent to 90 days of simple interest for CDs with shorter terms and 180 days of interest for CDs with longer terms. There are no-penalty CDs available, but they usually offer lower interest rates.
CDs can be a good place to store money you'll need for retirement spending or college tuition payments for your kids in a few years. However, since your money is locked up for a set term, they're not ideal for your emergency fund.
It's worth noting that CD rates could also decline soon if the Fed cuts rates. This won't affect a CD you already own, but if you open a new CD six months from now, after a rate cut, it's likely that CD will pay a lower interest rate than it pays right now.
The Best Place for the Highest Returns
While CDs and high-yield savings accounts can be good choices for your money, they're not the best place to grow your savings. The stock market is a better option to maximize your returns over the long term.
The S&P 500's historic annual rate of return is 10.2%, far higher than CDs and savings accounts.
There's no guarantee you'll achieve that rate, of course, but the potential for significantly higher returns in the stock market makes it a far better place to grow your savings over the long term. Opening a brokerage account and opting for a low-cost index fund is a great way to get started.
The good news is that you have multiple choices for your money right now, whether you choose a high-yield savings account, CD, or the stock market. Just figure out what your financial goals are and then choose the account that best fits your needs.
