High-yield savings accounts are extremely popular, and with many boasting interest rates over 5%, which is much higher than the average savings account rate, it's no wonder so many people are interested.
This renewed interest has sparked a debate about where to find the best high-yield savings account rates. Interest rates are constantly changing (I've received 15 emails in the past year saying Ally has raised their rates again), and many accounts function the same, so there really is no “best” account. As long as the account doesn't have bank maintenance fees, using any HYSA is far better than using a “traditional” savings account.
My first high-yield savings account was Ally.
When I first started saving, I opened a high-yield savings account with Ally after reading articles comparing different banks and seeing the name come up frequently.
Overall, I am happy with this choice and it is going well. I have started saving an emergency fund in this account. Experts recommend starting with an emergency fund because if you need to withdraw funds at any time when something unexpected happens, it will be very difficult to save for other things. Thanks to an emergency fund, you will have a stable foundation for your savings journey.
One of the things I like about Ally is the “Savings Buckets” feature, which allows you to set up multiple savings funds (i.e. savings accounts for different purposes) in one place. Many users take advantage of this and use it to save for different purposes. Common “buckets” include emergency funds, holiday savings, vacation funds, etc.
While this may be a good strategy for you, I knew it wasn't the best way to save for me. I wanted my savings in a different bank, so I decided to open a separate HYSA instead.
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I have two more accounts in Capital One 360 for long term goals
I decided to open a Capital One 360 savings account because they had a generous bonus for new users when I signed up. Capital One's interest rate was comparable to Ally's when I signed up, so I didn't see a big difference in the interest deposits. I opened this account to save for a large medical expense, InvisAlign, and the high interest rate, bonus, and focus on that goal helped me reach my goal quickly.
Currently, I have one account with Ally and two with Capital One. I've had my emergency fund in Ally all this time, and the total has rarely dipped below $6,000 (a 6 month minimum for me). I get a monthly interest deposit every month, which is a nice little bonus that helps keep my funds flush.
My Capital One accounts are more active: I use my savings account for long term savings (currently on an extended break from work) and my checking account for short term goals like buying a new iPad.
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Each month, I allocate a different amount to each account.
So using these accounts has helped me achieve several goals over the past three years that may have seemed impossible on a teacher’s salary (a $5,000 car, a $6,000 InvisAlign, a $5,000+ trip to the Maldives, and now an extended vacation).
Once I had reached the required amount for my emergency fund, I consistently allocated $100-200 per month to other accounts and prioritized them. This meant giving up other things I might have wanted (I rarely buy material things) and instead prioritizing the things that matter most to me. With a high-yield savings account, I was able to receive a small bonus deposit each month.
As expectations for HYSAs continue to rise, I recommend not fretting too much about which account is the “best” and just get started. I ended up reading a lot more articles than I should have and ended up opening another account.
Interest rates range from 4% to 5.50% and are always changing, so I'm happy with most HYSAs that don't charge fees. By putting small fixed deposits and savings in various accounts, my savings have grown faster than I expected.
This article was originally published in August 2023.
