If you’re struggling to save money, you’re probably not taking advantage of a key tool to help maximize the money you do have: a high-yield savings account. You don’t need to earn a high income or have a lot of money saved to see the massive benefit of a high-yield savings account, which is why it’s such an amazing tool for low-income earners.
I’ve previously written about why you need a high-yield savings account, but I wanted to create another article that’s more focused on helping you where you’re at: 59% of Americans don’t have $1,000 in savings. This article will show you how a high-yield savings account helps you boost your savings if you only have $100, $250, $500, or $1,000 saved up.
Saving $100 in a high-yield savings account vs. a traditional savings account
High-yield savings account
If you put $100 in a high-yield savings account and get an average interest rate of 3.5%, that $100 could grow to $119 after 5 years. While a $19 increase may not sound like much, it’s pretty impressive if you think of it as a percentage instead of a dollar amount—that’s a 19% growth over the course of 5 years, even if you don’t add any more money to that account.
Similarly, if you get an average interest rate of 4.5%, that $100 could grow to $125—a 25% growth in 5 years just from putting your money in a high-yield savings account.
Traditional savings account
However, if you keep your money in a traditional savings account rather than a high-yield one, that $100 could probably only grow to $103 after 5 years. A regular savings account helped your money grow by just 3%.
By keeping your money in a traditional savings account instead of a high-yield savings account with a 3.5–4.5% interest rate, your money misses out on the chance to grow by 16–22%.
Saving $250 in a high-yield savings account vs. a traditional savings account
High-yield savings account
If you put $250 in a high-yield savings account and get an average interest rate of 3.5%, that $250 could grow to $297 after 5 years—in other words, you increased your savings by 18% just because you put your money in a high-yield savings account.
And if you get an average interest rate of 4.5%, that $250 could turn into $312 after 5 years. In other words, you could grow your money by almost 25% just by putting it in a high-yield savings account.
Traditional savings account
If you kept that $250 in a traditional savings account with a 0.61% interest rate, that $250 would only grow to about $257 after 5 years—that’s an increase of over 2%. By keeping your money in a traditional savings account instead of a high-yield savings account with a 3.5–4.5% interest rate, your money misses out on the chance to grow by 16–23%.
Saving $500 in a high-yield savings account vs. a traditional savings account
If you put $500 in a high-yield savings account for 5 years and get an average interest rate of 3.5%, that $500 could grow to $595 after 5 years—that’s a growth of 19%.
Similarly, if you get a 4.5% interest rate, that $500 could grow to $625 after 5 years. In other words, you could grow your money by 25% because you put it in a high-yield savings account.
Traditional savings account
In contrast, if you were to leave your money in a traditional savings account with a 0.61% interest rate instead of using a high-yield savings account, that $500 would only grow to about $515 after 5 years. That’s a growth of just 3% in 5 years.
Saving $1,000 in a high-yield savings account vs. a traditional savings account
High-yield savings account
If you put $1,000 into a high-yield savings account and get an average interest rate of 3.5%, that $1,000 could grow to $1,190 in 5 years—an increase of 19%.
And if you get an average interest rate of 4.5%, that $1,000 could grow to $1,251 in 5 years. You could potentially increase your savings by 25% in 5 years without even saving a penny more just by putting your money in a high-yield savings account.
Traditional savings account
If you use a regular savings account with an interest rate of 0.61%, that $1,000 would grow to just $1,030 in 5 years. If you put your money in a regular savings account with a 3.5–4.5% interest rate, you could miss out on $160–$221 after 5 years.
Automate your savings into a high-yield savings account.
And if you want to save even more, set up automatic deposits into your high-yield savings account each time you get paid. Even if you can only save $5, $25, or $50 at a time, automating your savings and using a high-yield savings account can be a powerful way to boost your savings.
Automating your savings has been shown to be most beneficial to earners who make $35,000 or less. That’s because automating your savings makes saving non-negotiable and eliminates present bias and savings inertia—obstacles that disproportionately affect low-income earners.
If you earn a low income or work paycheck to paycheck, you’ll want to do everything in your power to make the most of your money.
You don’t need to earn a high income or have a lot saved to see the massive benefit of a high-yield savings account. A high-yield savings account could help skyrocket your savings even if you don’t have much saved up. That’s why, if you earn a lower income, you absolutely should take advantage of this tool to effortlessly grow your money.