This Is How Much Money You Can Make With $20,000 in a High-Yield Savings Account
KEY POINTS
- Rates on high-yield savings accounts have recently hit record highs.
- However, all banks are not created equal, so it pays to shop around for the best rate available.
- The ideal account earns enough to beat the inflation rate and is FDIC-insured.
Unless you've been chilling on a deserted island, you've probably heard about the great rates on some high-yield savings accounts. The operative word here is "some." While some banks are offering high rates, others have kept their rates stubbornly low.
Here, we look at what you can expect if you shop around; find a generous rate on a risk-free, high-yield savings account; and deposit $20,000.
The right financial institution matters
As mentioned, not all banks are created equal, and not all offer high rates. Fortunately, there are plenty of great savings accounts that do.
For the sake of this illustration, we've chosen to use UFB Secure Savings Account rates. UFB is a division of Axos Bank, one of the most established online banks in the U.S. The fact that UFB has no branches means that it has low overhead, which allows the bank to offer a rate of 5.25% APY on all high-yield savings account balances.
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
|
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 6, 2024
Min. to earn
$1
|
APY
4.25%
Rate info
4.25% annual percentage yield as of July 6, 2024
|
Min. to earn
$1
|
Citizens Access® Savings
APY
4.50%
Min. to earn
$0.01
|
APY
4.50%
|
Min. to earn
$0.01
|
Before we dive in, here are a few other UFB perks we like (and features you'll want to look for in a bank):
- No monthly maintenance fees
- No minimum deposit is required to open an account
- Access to your funds 24/7
- FDIC insured up to $250,000 per individual and $500,000 for joint accounts
- Interest is compounded daily
How much could you earn?
It's important to note that interest rates on high-yield accounts are variable. That means the rate could go up or down at any time. Let's assume that the rate on your account remains unchanged for 24 months. Here's what would happen to your $20,000 deposit.
If your money remains in the account for this many months | You'll earn this much interest |
---|---|
1 | $85.46 |
2 | $171.29 |
3 | $257.48 |
4 | $344.05 |
5 | $430.98 |
6 | $518.28 |
7 | $605.96 |
8 | $694.01 |
9 | $782.44 |
10 | $871.25 |
11 | $960.43 |
12 | $1,050.00 |
13 | $1,139.95 |
14 | $1,230.28 |
15 | $1,321.00 |
16 | $1,412.11 |
17 | $1,503.61 |
18 | $1,595.49 |
19 | $1,687.77 |
20 | $1,780.45 |
21 | $1,873.52 |
22 | $1,966.99 |
23 | $2,060.86 |
24 | $2,155.12 |
It's important to beat inflation
A good savings account should help your money grow faster than the inflation rate. Considering that the annual inflation rate in the U.S. was 3.5% for the 12 months ending April 2024, this account accomplishes the needed goal. Better yet, it achieves the goal of beating inflation without risk to your initial deposit.
Given the number of banks, credit unions, and other financial institutions out there, it can take time to figure out which is right for you. The best bank is one that can help you achieve your financial goals by taking risks you're comfortable with.
Suppose you're looking for a financial institution with a great rate on a high-interest savings account. In that case, you may also want to decide if you're comfortable having a savings account with one bank and a checking account with another. Having as many accounts as you would like spread out among financial institutions is fine, but if you'd rather have all your basic accounts under one roof, that's okay, too. We all have different preferences.
Thanks to the internet, you can quickly learn what a financial institution offers, from checking accounts to safe deposit boxes and investment accounts. Ideally, any bank you work with charges no (or low) fees, is federally insured, and offers a remarkable rate of return.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
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