Here's How Much Interest You Can Earn on $5,000 in Savings

It's a dilemma that many would love to have to contend with: You open your email and find out you're about to get an extra $5,000. Now the question is, what do you do with it? How can you get the most out of that cash? Here's what you should know if you're looking at stashing that money in a savings account.

How much you can earn on $5,000 in a savings account

There are two types of savings accounts you can use: a traditional savings account and a high-yield savings account (HYSA). And although you might automatically think the latter is the better option, there are factors other than the annual percentage yield (APY) that you should consider.

But first, let's look at the actual earnings that you can expect on $5,000 with these two account types.

With a traditional savings account, you might not earn much in interest, but keep in mind that these accounts offer the opportunity to earn some interest over time while keeping that cash easily accessible -- with few, if any, requirements to earn interest.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of July 4, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of July 4, 2024	Min. to earn $1
Citizens Access® Savings APY 4.50% Min. to earn $0.01 Open Account for Citizens Access® Savings Member FDIC.	APY 4.50%	Min. to earn $0.01

With a HYSA, by contrast, there is an opportunity to earn more in interest. But there may be requirements to meet a minimum initial deposit threshold or maintain a certain minimum balance in order to score that high rate. So HYSAs can be less accessible for beginning savers.

With both of these accounts, though, there are two important caveats to consider: First, you'd have to leave that cash alone for those earnings to apply (taking out money would lower it, but you could also earn more if you were to contribute more to that account.) And secondly, the rates here aren't fixed. So if the rate changes, you may earn more or less than you did when you first opened the account.

Three other places you may want to put that cash

If you're stuck on some of the cons associated with savings accounts, there are other options that could work better for you.

1. CDs

Certificates of deposit (CDs) offer a fixed interest rate that can be similar to what you'd find with an HYSA -- so you'd lock in those earnings and potentially earn more than with a savings account if rates drop in the future. You just have to be willing to part with that cash for anywhere from six months to several years, depending on the CD term you choose.

2. Retirement accounts

If you aren't already contributing to a retirement account, or you're doing the bare minimum, you might consider putting some of that extra cash into your 401(k) or individual retirement account (IRA). As long as you aren't going over the annual contribution limits, this can translate to massive earnings over time. For instance, if you invest $5,000 over 40 years and it earned an average return of 7%, that would amount to almost $75,000.

3. Investment portfolio

Investing in the market can also potentially lead to more earnings than a traditional savings account or HYSA, as some stocks may perform much better over the course of a year. Of course, there is more risk here as you can lose money if the market dips. So this is best only done if you already have emergency savings to fall back on and you can afford to take on that risk. And, in general, investing is best approached as a long game, as you'll have more time to wait out periods of volatility.

It can be difficult to know exactly what to do with an influx of cash. After all, you want to make sure you're getting the most out of your money. But as long as you know your goals and needs, you'll be able to select the account that offers the best of both worlds.