So you’ve heard about high-yield savings accounts and are wondering what all they hype is about? Well, they’re a little like a traditional savings account…but soooo much better.

The best high-yield savings accounts bridge the gap between saving and investing. It’s an easy way to earn more interest while still having quick access to your cash.

To help you decide if high-yield savings accounts are right for you and your money, here’s a quick rundown of what they are and how they work!

What is a High Yield Savings Account?

All savings accounts tend to earn interest on deposits. High-yield savings accounts are no different except that you earn interest at a higher rate than with a traditional savings accounts. Sometimes they go by the name “high-interest savings accounts,” but it’s the same thing.

Since high-yield savings accounts are FDIC insured, it’s one of the best low-risk investments for a secure return on your money.

Think about it. If given a choice between keeping your money in an account that earns 0.1% or one that earns 2.45%, it makes sense to pick the one with a higher interest rate. After all, receiving more interest means you’ll earn more money. And when it comes to saving, more money is where it’s at.

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4 Major Benefits of High-Yield Savings Accounts

Saving money isn’t always easy, but high-yield savings accounts can help. The most significant advantage is earning more interest. The average savings account earns 0.9% interest, with brick-and-mortar banks coming in at a measly 0.01%. Compare that to a high-yield account that can make 2% or more, and you begin to see the benefits.

1) Earn More Money

Whatever your financial goals are, earning more money will get you there faster. A high-interest account gives you the chance to get a higher return on your deposits. Instead of letting your money sit stagnant in a traditional savings account, earning more interest means your money is working harder for you and growing faster.

2) Easy access to your funds

Banks offer a ton of financial products to pick from. But many of the higher-earning options, like your typical CD, can tie up your cash for up to a year – sometimes more. High-yield savings accounts allow you to withdraw your money whenever you want.

Like most savings, you can only withdraw up to six times per month without a penalty. You shouldn’t need access to funds in this often anyway, so this shouldn’t be a problem.

3) Your money is insured

Unlike investments, you won’t lose your deposit with a high-yield savings account. That’s because the Federal Deposit Insurance Corporation, which you know as the FDIC, insures your deposits up to $250,000.

If you prefer to keep your money with a credit union, your money is still safe. With a high-yield savings account at a credit union, the NCUA (National Credit Union Administration) covers your money. Just like the FDIC, the NCUA insures your funds up to $250,000.

4) Make saving easier

Setting up an automatic transfer to a high-yield savings account is one of the easiest ways to save money. You can add funds to your account anytime you want. Some banks even reward you with higher interest rates if you make a deposit each month.

When to Use a High-Yield Savings Account

High-yield savings accounts are a great place to stash cash you might need in the next year or two. You’ll have easy access to your funds and earn a higher interest rate that will grow your money and protect it against inflation, too.

Here are a few ways to use a high-yield account:

  • Emergency funds – For times of crisis, such as a job loss or unexpected home repair, an emergency fund acts as a safety net. If you’re just getting started, saving $1,000 is a good goal. Ideally, you’ll want to keep 3 to 6 months’ worth of expenses for life’s unexpected setbacks.
  • Holiday savings – It might be the most wonderful time of the year, but the holidays are also one of the most expensive. Setting aside money in advance will protect your budget next holiday season. Consider the cost of gifts, extra food for holiday gatherings, and decorations, too.
  • Travel funds – Putting a vacation on credit is never a good idea. Start saving now for your epic vacay so you won’t add any debt during your next travel adventure.
  • Summer camp – Kids are expensive, and summer camp is no exception. If you plan now, you’ll ease the burden when it comes time to pay for camp. Don’t forget to set aside a little extra for traveling to and from the camp, and for extra clothing or gear they might need.
  • Long-term savings goals – Some financial goals do better as investments, such as for your retirement. But high-yield savings accounts work well to put money aside for homeownership, auto purchases, or that new iPhone you’re looking at.

How to Pick the Right Bank

Banks and credit unions, both online-only and the brick-and-mortar variety, offer high-interest savings accounts. The local branch down the street might seem convenient, but you want to shop around to get the best benefits.

Pay attention to the interest rates you’ll earn. Some banks offer high introductory or promotional rates but decrease them after a few months. Banks can raise or lower rates at anytime, so make sure you read the fine print.

Check the terms and conditions of the account, too. Opening an account with just a few bucks is possible at some banks, while others require a minimum deposit of $10,000, $25,000, or more. Additionally, some reward you with higher returns for keeping a certain amount of money in your account or by making regular deposits.

For instance, CIT Bank is one of our favorite picks for high-yield savings. With their “Savings Builder” account, you can earn higher interest rates just by adding money to your account each month. If you have a monthly deposit of at least $100, CIT Bank will pay 2.45% APY, regardless of your balance.

Choosing a High-Yield Savings Account: Final Thoughts

For the chance to earn a higher return on your money without committing to long-term investments, a high-yield savings account could be your best bet. It won’t work for everyday spending since there’s a monthly withdrawal limit, but it’s an excellent option for your emergency fund or short-term goals.

Check out the details before opening an account. If you the account requires a minimum opening deposit or a minimum monthly balance, you need to know. Make sure you understand any fees, too.

In the end, a high-yield savings account is a sweet deal. It can put your money to work for you and help you reach your goals faster without much risk. After all, don’t you want to earn as much as you can from the money you already have?

Do you have a high-yield savings accounts? Tell us where you bank in our comments below! What's the buzz about high yield savings accounts? We'll cover what they are, their benefits, and when they're right for you.

Accelerate Your Savings!!! – Earn up to a 2.45% APY with a CIT Bank Savings Builder account! Use the link above to learn more.