More Than Two-Thirds of Americans Are Missing Out on Bonus Cash -- Here's Why

If you're one of the Americans fortunate enough to have cash savings, you might not think about it much -- beyond being grateful that you have it when an unplanned bill pops up. But while it's a terrible idea to put your emergency fund or cash you've saved for a near-term expense (like a vacation or a down payment on a large purchase like a home or car) in the stock market, that doesn't mean you should accept not earning any return on that money at all.

High-yield savings accounts (HYSAs) are paying high rates as a result of a higher federal funds rate. Here's how you can capitalize on this -- and why you should.

Got a HYSA? You're in the minority

According to recent savings account research by The Ascent, just 31% of us have a savings account paying 4% APY or more. APY stands for annual percentage yield, and this is defined as the amount of interest you can earn on your savings throughout the year. For example, if you have $10,000 saved and your account has a 5% APY, that'll generate $500 for you in a year (assuming the interest rate doesn't change). $500, just for keeping your money in the account? Wow!

If you haven't opened a HYSA yet, I highly recommend acting now. It's especially crucial to take advantage of this opportunity while you have it. The reason APYs are so high on these accounts right now is that we're also living with a higher federal funds rate.

The Federal Reserve raised its benchmark rate 11 times between 2022 and 2023 in an attempt to bring down rampant inflation. The Fed doesn't set consumer interest rates, but the two tend to move in the same direction. Consequently, we've got higher rates on savings accounts, CDs, and money market accounts -- but also higher rates on loans and credit cards. Since inflation has eased since its peak in June 2022 (9.1%, ouch), the Fed is expected to lower its benchmark rate this year. When it does, rates for consumers will likely fall, too.

What can a HYSA do for you?

You already know that a HYSA will pay you more interest on your banked cash. But these accounts have other attractive features worth mentioning. The best HYSAs are FDIC-insured, which means that up to $250,000 of your cash will be protected in case of bank failure.

It's incredibly easy to open a HYSA with an online bank. (You'll usually find the best rates with online banks since they don't have the overhead costs that come with maintaining physical branches and can pass the savings on to account holders in the form of higher rates.) Doing so will take just a few minutes.

You usually won't need a certain minimum deposit to open the account, and you usually won't even be charged a monthly fee to maintain the account. And online banks often have great mobile apps where you can move your money around easily, see saving and spending trends, and possibly even access budgeting tools and perhaps your credit score. My own online savings account offers sub-accounts that I use to save toward different goals, and they made saving easier and more fun in 2023.

Here's how to find the right HYSA for you

I'm hoping I've sold you on HYSAs and you're ready to open one of your very own. Good news! The Ascent maintains a list of the best high-yield savings accounts around, so hop on over and take a look. I'd encourage you to choose an account that has the right features for you beyond just a high APY, because remember, savings account APYs are not fixed. If the Fed cuts rates this year, your savings account's rate will likely follow suit. But ideally, you like the account enough to keep it, even if the interest you earn on your cash dips.