Introduction
Putting money away into savings is an important step in creating financial security for yourself and family. Ideally, you should have at least enough money in savings to cover six months of household expenses in the case of an emergency. The added benefit of choosing a high-yield savings account is that while that money sits in your savings account, interest accrues, leaving you with more money than when you started.
Annual Percentage Yield
The differences between a regular savings account and a high-yield savings account revolve around the annual percentage yield (APY). The APY is the annual return that your account gains in the course of a year. This amount is usually expressed as a percentage rate. The higher the annual percentage yield, the more money your account will grow in interest each year. High-yield savings accounts tend to have higher APYs.
FDIC
Another advantage of a high-yield savings account over other saving methods, such as saving cash at your home, is that your money is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000. This means that if the bank goes under, your money is still safe.
Requirements
High-yield savings accounts through brick and mortar banks often have additional requirements to open a high-yield account. First, many require a higher opening deposit to start the account. They may also require that a specified amount of money always be in the savings account, with a penalty assessed for the account dropping below that amount. Many banks also limit the amount of withdrawals and transfers you can make from the account each month.
Online
There are also many high-yield savings accounts that can be opened through online banks. Because these banks do not have the upkeep of brick and mortar buildings, they can often offer some of the highest APYs without many of the requirements of your local banking branch.
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