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If you’re saving for any reason, one of the best places to keep your money is a high-yield savings account. High-yield savings accounts are incredibly safe and give you an interest rate far better than you would get from a traditional bank savings account. In some cases, you could earn over 100 times more. That’s a huge difference!
Keep reading for five of the best uses of high-yield savings accounts. If you’re saving for any type of long-term need, these included, choose a low-cost, high-interest account. Here are a couple of our favorites:
CIT Bank Savings Connect Account
- Our Rating 4.5/5 How our ratings work
- APY4.65%
Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Savings Connect account are variable and subject to change at any time without notice.
- Minimum
Deposit Required$100 - Intro Bonus N/A
CIT Bank's Savings Connect account is one of our top picks for high-yield savings accounts. Featuring a competitive flat APY on all balances, it can go head-to-head with most of the top savings accounts available. What's more, you don't have to do anything special to earn this high interest rate; many similar accounts (including some offered by CIT) only offer their highest interest rates to customers who complete certain requirements.
Overview
With extremely competitive interest rates and a host of convenient features, the CIT Bank Savings Connect account can go head-to-head with nearly any other savings account in the U.S.
Pros
- Competitive APY
- No monthly service fee
- Free electronic bank transfers to checking accounts (even if it isn't a CIT checking account)
Cons
- No fee-free ATM network
- Minimum opening deposit required
Axos High Yield Savings Account
- Our Rating 3/5 How our ratings work
- APYUp to 0.61%
Earn 0.61% APY on balances of $24,999.99 or less. Balances of $25,000 or more earn reduced APY.
- Minimum
Deposit Required$250 - Intro Bonus N/A
The Axos High Yield Savings account offers a maximum APY of 0.61%, which is well over the national average, and no monthly fees. However, there are many more high-yield savings accounts out there with considerably higher APYs, most of which have no monthly fees as well. Axos is also an online bank, so it’s not a good option for people who frequently handle cash.
Overview
Axos Bank’s High-Yield Savings Account offers customers up to 0.61% APY on balances of $24,999.99 or less. It also includes Axos’ suite of digital money management tools and a free ATM card upon request.
Pros
- No monthly balance requirements or maintenance fees
- Free ATM card upon request
Cons
- APY is low compared to similar accounts
- Minimum deposit required to open account
- APY decreases with higher balances
Remember, you don’t have to keep a high-yield savings account at the same bank as your checking account. In fact, it may be better to keep it somewhere else to remove temptation. But more on that later on.
Without any further ado, here are five great uses for a high-yield savings account.
1. Keep Your Emergency Fund in High Yield Savings
According to the Federal Reserve, 40% of households could not afford a $400 purchase from savings. If that sounds like you, it’s time to get started with an emergency fund. Using a high-yield savings account, you can save a little at a time for a rainy day or financial emergency.
If your kid gets hurt and needs a visit to the ER, if your car sputters to a stop or if your furnace decides to stop working (on New Year’s Eve when it’s below freezing, of course), you can tap into that emergency fund instead of going into debt.
I’ve kept my emergency fund in high-yield savings accounts for more than a decade. I’ve had few financial emergencies, but I never had a financial crisis thanks to my savings.
2. Save for Vacations or any other Big Purchase
I’m a big fan of using credit card rewards to pay for vacations, but I can’t pay for the entire vacation with rewards miles and points. For the activities, meals and other needs on vacation, it’s good to have savings set aside.
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Many people use high-yield savings accounts to automatically save a certain amount from every paycheck for future vacations. Others may set up a temporary savings goal for a major purchase. When I wanted to buy a $1,000 DJ mixer, I saved around $50 per month in a high-yield savings account until I could make the big purchase debt-free.
3. Save for a Down Payment for a Home or Car
New cars and homes are some of the biggest purchases you’ll ever make in your life. To lower your monthly payment and improve your odds of getting approved for a loan, it’s a good idea to save up a big down payment.
When your money is in a high-yield savings account, it will likely earn a lot more than your checking. At the same time, funds are protected by the FDIC for up to $250,000 per account holder per financial institution. That means you get up to $500,000 in insurance on joint accounts. That’s a winning combo for your biggest savings goals.
4. High Yield Savings Accounts for Kids
As a dad to two amazing girls and an awesome little boy, I want to make sure my kids are financially prepared for the future so they can start life on a solid footing. That includes college savings and long-term investments. When they are old enough to have their own money, and it’s more than fits in a piggy bank, high-yield savings is the best place for them to save.
Kids should get the same FDIC insurance and higher interest rates that you do, after all. And thanks to the power of compounding, kids may see the best benefits, as their funds have more time to grow. Showing them their bank statements and interest earned can teach them important lessons about money while motivating them to save instead of spend.
5. Save to Remove the Temptation to Spend
Some people have a personality where they can’t seem to hold onto money for very long. It’s important to understand yourself and your money habits. If you’re the kind of person who loves to spend every dollar they earn, a high-yield savings account can be a barrier that helps you save with less temptation to use the money on a new Xbox or Tory Burch bag.
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If you are paid with direct deposit, you may be able to split your paycheck into two accounts. Sending part of your income to savings automatically means you won’t even miss it. If that’s not an option, setting up recurring transfers from checking to savings makes it so you regularly add to savings without having to think about it.
High-Yield Savings Are the Best Kind of Savings
I don’t know about you, but I’d rather have more money than less money. If you want to make more from your savings, a high-yield savings account is definitely the best choice. And with other benefits like FDIC insurance and automated savings features, there’s no reason to settle for a sub-par savings account.
Ready to save more?Explore the Best High-Yield Savings Accounts
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If you’re in the market for a better savings account, check out our list of the best high-yield savings accounts to fit your needs.
Lee Huffman
Lee Huffman spent 18 years in banking and investments and now uses that insider knowledge to write about credit cards, travel, and other personal finance topics. Lee enjoys showing people how to travel more, spend less, and live better through the power of travel rewards. You can connect with him at BaldThoughts.com.
