How to make money using a high-yield savings account

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High-yield savings accounts offer higher APYs than most traditional savings accounts or money market accounts.  (iStock)

If there were an easy way to get rich quick, everyone would be doing it. Unfortunately, the path to financial freedom is paved with patience and restraint. You could put your money in a checking account, but you might be tempted to spend it. Instead, you can for short-term savings goals or for building an emergency fund. After all, if your money will sit in an account, why not get the most out of it?

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How to earn more money using a high-yield savings account

High-yield savings accounts are similar to traditional savings accounts except that they have much higher annual percentage yields (APYs).

APYs tell you how much you can expect to earn in one year.

No matter how much money you have to deposit — don’t leave money on the table!  can give you more bang for your buck.

High-yield savings accounts also compound interest, which means you earn money on the principal balance and on the interest you’ve already earned over a specific time, usually monthly or quarterly. Even when , your money can really add up.

How is the APY determined?

Unlike CDs where rates are fixed at the time of deposit, high-yield savings accounts have variable rates, which are closely tied to the federal funds rate set by the  (FOMC). The federal funds rate is the interest rate that banks and credit unions use when borrowing and lending balances to other financial institutions overnight.

Rates on high-yield savings accounts go down when the Federal Reserve lowers the federal funds rate. When the Federal Reserve increases rates at a future date, high-yield savings account rates should increase also.

Applying for a high-yield savings account online is a simple process with sites like Credible, where you can  in minutes.

How else can I grow my money?

Although high-yield savings accounts are an excellent way to save for a downpayment on a home, pay for your wedding, or set-up an emergency fund, they are not the only way to grow your money. Here are two other easy ways to boost your savings.

  1. Money Market Accounts
  2. Certificates of Deposit (CDs)

1. Money Market Accounts

Money market accounts (MMA) or money market deposit accounts (MMDA) have features not typically found in most savings accounts. You may earn a higher interest rate than with a traditional savings account, but only if you maintain a high minimum balance. MMA’s are FDIC-insured and come with check writing and debit card privileges. You may pay monthly maintenance fees, and similar to high-yield savings accounts, you are limited to only six transactions per month.

2. Certificates of Deposit (CDs)

Certificates of Deposit (CDs) offer higher APYs than most high-yield savings accounts or money market accounts. You get a higher interest rate in exchange for keeping your money untouched in your account for a predetermined time period. However, if you need to withdraw your money early, you may face an early withdrawal penalty.

Unlike high-yield savings accounts where rates are variable, rates on CDs are fixed at the time of deposit. Accounts are FDIC-insured, but you can’t access your money for a predetermined term, or you may pay an early withdrawal penalty.

You could also spread your money across different assets, like stocks, bonds, properties, and so on. With investing comes risk, and you can’t rely on any one asset to get rich quickly. But if you’re in it for the long run, investments can grow your money.

Are there other money-saving tips?

While interest rates are low, or  can lower your payments each month by several hundred dollars. If you have more than one student loan, you may also want to consider consolidating your loans to one monthly payment instead of many.

If your credit is good, refinancing your mortgage can also be a way to convert a variable interest loan to a fixed interest loan and get a lower interest rate. You may even be able to change your term, from a 30-year term to a 15-year term, or vice versa.

With loan rates under 3%, now is a great time to refinance your mortgage. With Credible, you can  within minutes.

Final thoughts

High-yield savings accounts are a good option for short-term savings. They offer higher APYs than traditional savings accounts and some money market accounts. They are FDIC-insured, rarely charge monthly fees, and your money is easy to access, up to six times per month.

Explore how you can .

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