Earnings Potential of $1,000 in a High-Yield Savings Account
Key Takeaways:
You can earn a 4.00% APY or higher by moving your savings into a high-yield account, which could make at least $40 over 12 months on a $1,000 investment. When choosing a high-yield account, look for one that offers a competitive APY without fees, high balance requirements, or APY caps. Some online banks offer APYs of 5.00% or higher, but don’t overlook options with slightly lower APYs that may have fewer fees or account requirements.
How Much Will $1,000 Make in a High-Yield Savings Account?
If you put $1,000 in a high-yield savings account with an APY of 4.50% or higher and leave it for a year, you will earn at least $45. Many high-yield options currently offer rates between 4.00% and 5.00%, with some even higher. These rates are much better than the national average savings account rate of 0.46%.
Consider how much you could earn on a $1,000 investment at different APYs:
– 0.45% APY: $4.51
– 4.30% APY: $43.86
– 5.15% APY: $52.73
These calculations assume:
– The APY doesn’t drop
– Interest is compounded monthly
– No additional deposits or withdrawals
– No account fees
While savings account APYs can change and not all banks offer fee-free accounts, moving your money to a high-yield savings account will generally earn you more than a traditional savings account.
High-Yield Savings by Age
Here’s how an initial investment in a high-yield savings account can grow over time, highlighting the benefits of starting early and compound interest:
Starting at 20 Years Old:
– Initial investment: $1,000
– Years until age 60: 40 years
– Potential growth: $5,816.36
At 25 Years Old:
– Initial investment: $1,000
– Years until age 60: 35 years
– Potential growth: $4,667.35
Starting at 30 Years Old:
– Initial investment: $1,000
– Years until age 60: 30 years
– Potential growth: $3,745.32
At 35 Years Old:
– Initial investment: $1,000
– Years until age 60: 25 years
– Potential growth: $3,005.43
Starting at 40 Years Old:
– Initial investment: $1,000
– Years until age 60: 20 years
– Potential growth: $2,411.71
At 45 Years Old:
– Initial investment: $1,000
– Years until age 60: 15 years
– Potential growth: $1,935.28
Starting at 50 Years Old:
– Initial investment: $1,000
– Years until age 60: 10 years
– Potential growth: $1,552.97
At 55 Years Old:
– Initial investment: $1,000
– Years until age 60: 5 years
– Potential growth: $1,246.18
60 Years Old:
As you reach 60, consider other investment options or savings accounts suitable for retirement. A high-yield savings account can be a great way to keep your savings secure and growing, although it won’t offer the long-term growth potential of earlier investments.
What Is a Good High-Yield Savings Account?
A good high-yield savings account should have:
– An APY well above the national average
– No fees or easy-to-meet requirements to avoid fees
– No high balance requirement to earn the high APY
– No balance cap on earning the high APY
When choosing a high-yield savings account, read the terms and conditions carefully. Some banks offer APYs under 5.00% but have no fees or minimum balance requirements. Others with APYs above 5.00% might charge fees, require a larger balance, or only pay the high APY on part of the balance.
Final Take:
If your money is in a traditional savings account, you might be missing out on the earnings potential of high-yield accounts. However, it’s essential to look beyond just the APY when choosing a high-yield savings account. A high APY won’t benefit you if you can’t meet account requirements or if fees are eating into your earnings.