The money you save is valuable, not only because it's used to pay for goods and services, but also because it can work for you. And, if you have idle cash, you want to make sure that you're putting it to work to earn the largest return possible without taking significant risks.
That's where high-yield savings accounts come in. These accounts typically offer rates that are much higher than you'd get from a traditional savings account. But is opening a high-yield savings account and letting your money sit in the account the best way to use these savings vehicles?
Probably not. In fact, there are simple strategies that can help maximize the interest you earn on your savings.
Find the top-paying high-yield savings accounts now.
This simple high-yield savings strategy could maximize your interest
"Given persistent inflation and elevated interest rates, it's important for Americans to be thoughtful about how they manage their savings. One smart strategy is to use online savings accounts," says Gary Zimmerman, founder and CEO of MaxMyInterest. "Unlike traditional brick-and-mortar banks, online banks are able to pay higher interest rates, enabling savers to better keep pace with inflation and earn substantially higher returns over time."
But, Zimmerman says, it's not good enough to pick a single bank.
"Banks' needs for deposits change periodically, and so do the rates they offer," says Zimmerman. "So savvy savers will consider opening multiple high-yield savings accounts and moving funds to whichever bank offers the highest rate at a given time."
So, it may be best to have multiple high-yield savings accounts and review interest rates regularly. That could mean you review your high-yield savings returns once quarterly, once monthly or even once weekly.
The more often you compare your options and move your money to the account with the highest rate, the more interest you stand to earn.
How to take this strategy to the next level
It's important to earn as much interest as possible, but it's also important to consider bank bonuses. Many financial institutions offer sign-up bonuses that could put a few hundred dollars extra into your account. These bonuses can vary based on your initial deposit — but, in most cases, you won't receive your bonus until you've maintained a minimum balance in your account for a few months.
Nonetheless, these bonuses can be valuable. They're often worth far more than the interest a high-yield savings account offers. So, as you open multiple accounts, be sure to consider the bonuses they offer. Only open a new account if you can move the money needed to receive a bonus for that account without jeopardizing your bonus cash in another account.
Get the most out of your savings with a new high-yield savings account now.
Other ways to maximize the return you earn on your savings
High-yield savings accounts are an effective way to earn a meaningful return on your emergency savings, but when it comes to the rest of your idle cash, you may want to consider diversifying your holdings.
Here are a couple of other ways to maximize your return without making risky investments:
Buy gold
Gold has been used as a safe-haven investment by many, many investors. That's because the value of the precious metal tends to keep pace with inflation over time, which can help to protect your portfolio from inflation-related losses in buying power.
Moreover, when market conditions turn negative, investors tend to lean on gold as a way to keep their portfolios safe. This spike in demand often causes the precious metal's value to grow, even in the worst of market conditions. Experts suggest investors allocate up to 10% of their overall investing portfolio to gold.
Open a CD account
Another compelling opportunity is a certificate of deposit (CD). When you open a CD, you agree to keep your money in the account for the entire CD term, which generally ranges from a few months to several years. In exchange, the financial institution agrees to pay you a fixed interest rate for the entire term.
And, the fixed rates that CDs currently offer are some of the highest we've seen in decades. That's due, in large part, to the Federal Reserve increasing its target federal funds rate 11 times over the past couple of years, which has led to CDs offering impressive returns.
However, with inflation slowing, many experts believe that rates could fall at some point in 2024. So, locking in today's competitive returns with a long-term CD may be a wise decision.
Lock in today's high returns with a long-term CD now.
The bottom line
If you're storing your money in a traditional savings account or a safe, you're losing buying power to inflation. But even if you have a high-yield savings account, you may not be getting the highest return possible. To maximize your returns, follow the strategy above and diversify your holdings with safe investment options to ensure that you're getting the most from your savings.
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