Savings Account Rates Are Skyrocketing. Here's How You Could Earn $1,000 Per Year

Thanks to the Federal Reserve's repeated rate hikes, interest rates on savings accounts are the highest they've been in years. No more earning fractions of a penny on the dollar. Now the best accounts earn about five pennies on the dollar per year -- not enough to make you filthy rich, but sufficient to grow your savings above inflation.

But don't overlook those five pennies. While insufficient by themselves, the right savings with the right APY could generate enough pennies to make $1,000 or more over the next 12 months. Don't believe me? Hold on to your seat -- I'm about to give you the formula for earning some serious risk-free cash.

The recipe for earning $1,000 per year in a savings account

Ingredients (recommended):

• A savings account with at least 5% APY over the next 12 months and no monthly service fees
• Savings of at least $20,000
• A tissue to dry those tears of joy

To earn $1,000 in interest, first you'll need one of today's top-paying savings accounts, preferably one with a rate above 5%.

Next, you'll need about $20,000 in savings. This is money that'll make money, so it should be $20,000 you're not going to touch anytime soon. If you keep $20,000 in a savings account that earns at least 5%, you'll make about $1,000 after 12 months.

For example, let's say you open the lucrative Western Alliance Bank High-Yield Savings Premier through Raisin. This account has one of the highest APYs on the market, currently 5.36%. With $20,000 in savings, you'd gain $1,054 in 12 months (assuming that rate stays the same). Other savings accounts with APYs above 5% include:

• Columbia Bank High-Yield Savings Account: 5.27%
• UFB Secure Savings Account: 5.25%
• CIT Platinum Savings: 5.00% APY for balances of $5,000 or more

What happens if my savings rate changes?

Yes, this is a valid concern. Rates on savings accounts aren't fixed and can change in the future. In fact, rates could very well change by next year if the Federal Reserve decides to cut the federal funds rate, which would spur banks to do the same.

There is, however, one way to lock in today's high rates. It involves giving up access to your money (for a time), but it could give you a guaranteed return on your savings. That avenue is opening a certificate of deposit (CD).

Fortunately, today's top-paying CDs have slightly higher rates than savings accounts do. While APYs depend on terms, the best 12-month CDs are currently paying about 5.60%. Locking up $20,000 in an account that pays 5.60% would yield roughly $1,120 over the full term. Be mindful of early withdrawal penalties, which will cost you a portion of your interest. But so long as you obey your contract, those earnings are all but guaranteed.

If you're feeling adventurous, you could even combine CDs and savings accounts to help you earn $1,000 over the next year (shoot, you could even throw in a money market account while you're at it). You might even want to string several CD terms together, or what's known as a CD ladder, to lock in today's rates for longer periods.

All in all, savers have plenty of ways to lock in today's high rates and earn five pennies on the dollar for longer periods. If you have $20,000 or more in savings and you're not earning at least 5%, don't leave money on the table! Take a look at today's top-paying accounts and switch to a more lucrative account today.