As you become more and more mature in your financial position, you’ll increasingly want to diversify your accounts. When you’re first starting your financial journey, it’s fine to just have one checking account, but the more money that you start accumulating, the more you will want to start holding it in different types of accounts. IRAs, 529s, Roths, 401ks, checking, savings — these are all different types of accounts and they all serve different purposes.
Knowing where to put your money and how much should go in each type of account is a bit of a matter of personal preference. It will depend on your own unique situation, including your age, number of kids, family status, and how close you are to retirement. In this article, we’ll talk a little bit about how to best use a high-yield savings account.
What is a high-yield savings account?
Most people are familiar with the basic concepts of a checking account and a savings account. A high-yield savings account is not actually different from a regular savings account — it’s simply a designation indicating that it is paying a “high” amount of interest. There is no official designation of how much interest a savings account needs to pay out in order to be considered “high-yield”.
The interest that any savings account pays out varies mostly with macroeconomic conditions like the federal reserve interest rate. The Fed interest rate has a direct impact on the amount of interest that companies pay out. Another term that is similar to a high-yield savings account is a money market account. You can compare a money market account with a high-yield savings account here.
What kind of money should you put in a high-yield savings account?
Now that you know a bit about what a high-yield savings account is, it’s time to talk about how much money (and what kind of money) you should keep there. We’ve written before about how much money you should keep in your checking account, and a good rule of thumb is not very much. You should keep only enough to pay your regular monthly bills, with a little bit extra to avoid overdraft fees (Mint can help with this).
The reason for this is that most checking accounts pay hardly any interest at all. So excess money that you want to keep liquid is a good candidate for a high-yield savings account.
One type of account that fits very well in a high-yield savings account is your emergency fund. You want to keep your emergency fund in a separate account from where you pay most of your bills (typically a checking account). And putting that money into something that at least earns a decent amount of interest is a smart financial move.
Watching out for inflation
The other thing that you want to watch out for is to not put TOO much money into a savings account. While it might sound nice to be earning 0.5% or 1% or 2% on your money, you have to take into account inflation. If you earn 1% on your money but inflation causes your cost of living to go up 2%, then you’ve actually had a reduction of 1% in your actual purchasing power.
So while it’s a good idea to keep some money in an emergency fund that is easy to access in case of an emergency, you don’t want to keep too much in there. $1000 is a good place to start for an emergency fund, but you’ll want to gradually increase that to a couple of months’ worth of expenses if you can. Any more than that should be invested in assets like the stock market that have inflation-beating returns.
Where to find a good savings account?
If you’re looking for where you can find a good high-yield savings account, you can check out our curated lists of the best checking account offers and the best savings accounts.
One thing that’s important to realize is that in a time of fairly low-interest rates, the actual differences between two different rates are minuscule. If you have $2,000 invested in a high-yield savings account, the difference between a bank paying 0.5% and one paying 0.75% is only five dollars. So if there are other (non-financial) reasons for choosing one bank over another, keep that in mind.
You might also look at bank account signup bonuses. Many banks and credit unions give a bonus for signing up for a new account. Like credit card signup bonuses, banks do this in hopes of keeping you as a long-term customer. Getting $150 or $250 from signing up for a new account can dwarf the actual interest received from keeping your money in the bank. Just make sure to read the fine print, terms, and conditions of the offer to make sure that you earn your bonus.
has a category-leading bonus opportunity for new account holders: $300 when you open a new account (with no minimum deposit required) and complete the required qualifying activities.
BlueVine Business Checking
With no monthly maintenance fee, unlimited ATM fee reimbursements, a fantastic welcome bonus for newly incorporated businesses and long-incorporated businesses alike that open accounts by the stated offer end date and a nice remote deposit feature that you can use just about anywhere, Axos Bank Basic Business Checking is a fantastic alternative to Axos Bank Business Interest Checking. Apply 100% online (no paper forms required) and enjoy paperless statements once you’re signed up.
The Lili Account is a truly free, all-in-one checking solution that’s built with freelancers in mind. In practice, it appeals to a much broader audience: side hustlers and gig workers supplementing W-2 income, established solo professionals (one-person businesses), and full-time freelancers.
Brex Cash is a user-friendly cash account for growing businesses. With no fees or minimums, a generous welcome offer and ongoing rewards program, and an expansive lineup of value-added perks worth $150,000, it’s difficult to find fault here. Take full advantage of the powerful mobile app and don’t miss the super-simple advance payment scheduling tools, either.
Novo’s Powerfully Simple Business Banking product is another maintenance fee-free option for small-business owners and self-employed people. An easy application process, nice account opening bonus, robust mobile features, integrations with other useful small-business tools, and virtually no fees all count as standouts here. If you’re done with branch-based business banking, put Novo at or near the top of your list.
doesn’t have the best yield in the business checking space, but 0.10% APY on balances over $5,000 is better than nothing. Pair that yield with no limits or fees on transactions — ever — and you have an excellent account for active businesses able to keep some cash on hand. Mobile check deposits and a powerful debit card app (which includes a card-locking feature) simplify banking on the go.
is a refreshingly simple business banking platform that prides itself on “radically transparent pricing”. Just $10 per month unlocks its full slate of features, including unlimited payments, transfers, deposits, and debit card transactions; more than 300,000 in-network ATMs; mobile check deposit (and a slew of other mobile-friendly features); and unlimited sub-accounts for payroll, taxes, and more.
Citizens Bank Clearly Better Business Checking is one of the only business checking accounts that never charges a monthly maintenance fee. That’s excellent news for business owners working on thin margins.
The NBKC’s business checking account has no balance requirements, no monthly maintenance fees, and no transaction fees. As part of the MoneyPass ATM network, it offers fee-free withdrawals at more than 32,000 ATMs in the U.S. and Puerto Rico. And its simple Desktop Deposit feature — with added support from a robust mobile banking app — makes it easy to deposit checks remotely.
Huntington Bank Unlimited Business Checking is for established businesses with relatively large cash stockpiles and relatively frequent transaction needs. Other than a $10,000 monthly limit on free cash deposits (after which a fee applies), there’s no limit on transaction frequency. And customers can select one from a menu of exclusive money-saving perks, such as discounts on payroll services.
boasts low- or no-cost overdraft protection options and a robust suite of mobile-friendly features. It’s ideal for customers who can make the $1,500 minimum opening deposit and keep enough cash on hand ($5,000 or more) to waive the monthly maintenance fee. A reasonably high monthly transaction limit appeals to businesses with active cash flows.