Time to Open a High Yield Savings Account

Why You Should Open a High Yield Savings Account

Table of Contents

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If you are still keeping your savings in a standard bank account, then it’s time to level up! Stop losing out on easy money. Take your dollar bills and put them in a high yield savings account!

A high yield savings account (HYSA) is a federally-insured account with a higher annual percentage yield (APY) than a traditional checking or savings account.

To put it into perspective, let’s say you have $500 in your regular account earning 0.05% interest for a full year. This rate would only yield $0.25 over the course of the year! However, if you had your $500 in a high yield savings account earning 1.50% APY, you would gain $7.56. That’s a 3000% increase in extra money that you’re missing out on!

Brian’s previous post on high yield savings accounts provided an initial overview of our experience with them. We’ve had some hands-on practice with these accounts over the years. Our HYSAs have been fantastic resources for achieving goals, covering project costs, and funding our adventures along the way.

Cash Reserves

Your traditional savings account should hold about a month’s worth of expenses. Any savings beyond that should be allocated to different accounts.

A HYSA is a great place to park your emergency fund and other short-term savings for big purchases. It keeps your cash liquid and accessible without tax penalties while helping your money grow faster.

So, map out your savings, get organized, and start squirreling away for goals, such as:

  • House down payment
  • New car fund
  • House/vehicle maintenance
  • Renovation projects
  • Wedding expenses
  • Big vacations
  • Continuing education

Our Personal Goals

Brian and I initially opened a HYSA to save for our wedding. We had a two year engagement, which helped our timeline. Though we planned to pay for our wedding and honeymoon with the HYSA funds, our budgeting and timeline allowed us to pay for all costs out-of-pocket. Brian and I paid for our wedding and honeymoon festivities in full and started off our marriage with a nest egg of over $20,000.

Read about how our marriage impacted my financial outlook and how it’s changed me.

Our HYSA became a pre-marital nest egg that kick-started our joint emergency fund, which is separate from our own personal emergency funds. With our HYSA, we successfully saved for:

  • Down payment on our first single-family home
  • Real estate purchase
  • New zoned air conditioning system (Furnace and AC replacement and an AC heat pump install)
  • Miscellaneous home maintenance
  • Property taxes
  • International trips

We borrow from the Bank of Liann and Brian, only to replenish later. A high yield savings account is an incredibly useful tool. It’s helped us stay motivated to invest in ourselves, focus on our future, and keep building our savings.


Now, if you really don’t have much need for immediate cash access and your goals are more than a couple of years out, you may be better off stashing your cash in a Certificate of Deposit, Money Market Account, or dividend paying stocks through your brokerage account. Be sure to read any and all associated terms as these accounts usually come with fixed periods, higher balance requirements, and deposit requirements.

Choosing the Right HYSA

HYSAs are typically offered through online banks only. They pay higher interest rates than traditional brick-and-mortar banks since they have lower operational costs. To determine which HYSA works for you, consider the following points:

  • FDIC-Insurance coverage: Check to ensure protection against bank failure and theft up to $250,000.
  • Online presence: Do you like using the bank’s website interface and mobile app?
  • Customer support: How important is access to customer service? Are they available 24/7? Do they offer over-the-phone support?
  • APY: What APY are they offering? Note that this rate is variable and determined by bank competitors and the Federal Reserve.
  • Compounding Interest: Is the interest compounded daily or monthly? Daily is better!
  • Fees: Would you be charged any monthly maintenance or transaction fees?
  • Minimums or limits: Is there a minimum initial deposit to open your account? Or perhaps a maximum limit you can contribute to earn the promoted rate?

It’s important to note that you may come across HYSAs that offer 3% or more, but they’re usually only available up to a certain contribution, with specific qualifying purchase transactions, or direct deposit requirements.

There are plenty of fee-free, no-minimum HYSAs available with competitive interest rates. Head on over to websites like NerdWallet and Bankrate to help you decide which accounts are best for you.


Brian and I have 4 different high yield savings accounts between us. We currently bank with:

It doesn’t hurt to try out different bank accounts with different interest rates, as long as you are mindful of the terms. If you aren’t happy with your banking experience, you can always move your money and close your account without it affecting your credit score or rating.

What’s the Catch?

Simply opening a high yield savings account will net more money than if it remains sitting in your traditional bank account. So, why aren’t more people using high yield savings accounts? What’s the catch?

A HYSA isn’t as convenient as a standard checking or savings account. Here’s what you need to keep in mind:

Withdrawal Limits

The Federal Reserve only allows up to 6 withdrawals per month. Exceeding this limit can result in account fees or even closure.

Transfer Details

Some accounts limit your ability to make deposits into different kinds of investment accounts, limit the number of external accounts you can link, and have different transfer times. Brian and I have not had any issues with our accounts, but this is something to consider.

Deposit Options

If you receive check payments, will your bank accept a mobile check deposit or will you have to mail in checks or find an ATM?

Access to Your Funds

Most HYSAs only offer withdrawal via electronic fund transfer (EFT). Brian and I don’t have the ability to write checks from our accounts or use a debit card to withdraw funds.

Rate Changes

Though you can’t lose money through your HYSA, you can certainly expect fluctuations in gains since it offers a variable interest rate.

Tax Implications

Interest earned through any HYSAs is considered taxable income.

Don’t Miss Out

A high yield savings account grants you a super easy way to make passive income without risk. What are you waiting for? Do some research, find out which banks you’d like to work with, and submit an online application directly through the bank’s website! It typically takes about 10-15 minutes to set up an account. Though requirements vary depending on the bank, you generally need to supply your:

  • Name
  • Address
  • Social Security Number
  • Form of Identification, like a Driver’s License
  • Primary bank account information

The application process is simple and straight-forward. You’ll be on your way to padding your savings in no time. Don’t miss out on easy money.

What are you saving for today?

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