Are you maximizing your short-term savings return?
If your answer is “I don’t know” or “probably not,” then read this post to find out how to make ‘easy’ money simply by moving shorter-term savings to higher yielding accounts.
Whether you’re saving for an emergency fund or a vacation, improving the return on your savings accounts will help you reach your goals faster.
The difference between leaving cash in a traditional bank or brokerage savings account and investing it in a high-yield savings account can be worth thousands of dollars. Opening and moving money between savings accounts has never been easier, so chasing short-term yields online can be done with a few ‘clicks’.
And with annual inflation currently around 2.4% in the U.S., a short-term savings account yielding over 3% (assuming 20% tax rate) may even increase your purchasing power.
Read on to learn more about maximizing your short-term savings rate and where to find the best accounts.
What is a High-Yield Savings Account?
Banks compete aggressively for your short-term deposits with savings instruments, like Certificate of Deposits (CDs) and High-Yield Savings (HYS) accounts.
A HYS account allows you to earn a higher rate of return than traditional savings accounts. Unlike CDs, you can add money to these savings accounts at any time.
And you can withdraw or transfer those funds when you need them. Just be careful of any minimum balance requirements that might apply or else your monthly fee might offset the interest earned.
What’s your payoff?
The difference in your savings account return versus the best available option is your opportunity cost.
Currently, the average rate of traditional bank or brokerage savings accounts is 0.59% compared to an average of 4.44% for HYS accounts, according to Bankrate.*
As an illustration (see below), the opportunity cost for holding $50,000 in a savings account with this yield difference for a year would be $1,925.
Tip: Combine a HYS account with a cash-back credit card to fully optimize your returns on short-term spending and savings.
How to find the best HYS accounts?
The following sites can help identify the most competitive HYS accounts.
- Compare the Best Savings Accounts – Bankrate
- Standout Online Savings Accounts – NerdWallet
- Best High Yield Savings Accounts – Motley Fool
How to decide between HYS accounts and CDs
Consider buying CDs if you want to lock in a higher rate for a set period and don’t need immediate access to your funds, especially if interest rates are expected to decline in the future.
CDs are excellent for money you know you won’t need for a set period (e.g., a down payment on a house in two years, a car purchase in one year). You lock in a fixed interest rate for the term, so you know exactly how much you’ll earn.
If you are concerned about not having immediate access to your funds, then you can invest in a no-penalty CD, also known as a penalty-free or liquid CD. This is a type of certificate of deposit that allows you to withdraw your money before the CD matures without incurring an early withdrawal penalty, but typically offer lower interest rates than traditional CDs for similar term lengths.
Many people find that a diversified approach using a combination of these options works best. For example, you might keep your emergency fund in a HYS account and use CDs for other savings goals with longer time horizons.
If you’re interested in tracking market expectations about future rate changes that could impact the yield on your savings accounts, check out CME Group’s FedWatch tool.
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*as-of June 2025
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