- High-yield savings accounts offer interest rates ranging from 4.35% to 5.25%, surpassing the national average savings account interest rate of 0.47%.
- Earning 5% on a high-yield savings account means beating the national average by more than 10 times and enjoying one of the most competitive rates available.
- A high-yield savings account with a 5% interest rate is a great way to earn a meaningful return on your unused cash, surpassing standard savings accounts and providing quick access to funds.
Additional Coverage:
- Is 5% interest good for a high-yield savings account? (cbsnews.com)
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There’s no doubt that saving money is crucial. It provides a financial safety net for unexpected expenses and makes long-term financial goals, like buying a home, more attainable. However, simply saving money may not be enough if your savings aren’t earning a return that beats inflation. This is where high-yield savings accounts come in. But is a 5% interest rate competitive for this type of account?
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According to the FDIC, the national average savings account interest rate is currently 0.47%. However, this average includes traditional savings accounts. High-yield savings accounts offer much higher returns, with interest rates ranging from 4.35% to 5.25%. Earning 5% on a high-yield savings account means you’re beating the national average by more than 10 times and enjoying one of the most competitive rates available.
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To better understand the cash returns from a 5% interest rate, let’s take an example. If you deposit $25,000 into a high-yield savings account, you would earn $1,250 after one year, resulting in a total balance of $26,250. After five years, your cash returns would be $6,907.04, with a total balance of $31,907.04. It’s important to note that high-yield savings accounts often have variable interest rates, so your returns may change over time.
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High-yield savings accounts serve various purposes. They provide a place to quickly access funds for emergencies and allow you to earn a higher rate of return compared to standard savings accounts. It’s also beneficial for creating a sinking fund, which is money set aside for specific purposes like vacations, weddings, or debt repayment. Whether it’s saving for emergencies or planned expenses, a high-yield savings account is a great way to earn a meaningful return on your unused cash.
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There are several advantages to saving money with a high-yield savings account. First, the potential for high returns due to the higher interest rates available. Second, the ability to access your funds on demand, unlike CDs that tie up your money for a specific period. Lastly, these accounts are relatively safe and come with insurance coverage for balances up to $250,000.
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Although the APY paid on savings accounts might not seem like a priority for those living paycheck to paycheck, it’s important to realize that you could be leaving “free money” on the table. Read the fine print to understand any minimum balance requirements or fees associated with high-yield savings accounts, and ensure that you’re not missing out on potential earnings.
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In summary, a high-yield savings account with a 5% interest rate is highly competitive. It surpasses the average savings account interest rate and is considered one of the best rates for high-yield savings products. If you’re not earning 5% or more on your unused cash, it’s worth comparing different high-yield savings accounts available.
Read More About This Story:
- Is 5% interest good for a high-yield savings account? (cbsnews.com)