The beauty of high-yield savings accounts is that you don’t have to put down a lot of moneyto see your savings grow.
Thanks to compound interest, you can start off small, and, after making incremental deposits each week, your balance will balloon over time. Our favorite high-yield savings accounts require low (or no) minimum balances to start earning interest on your savings. If you’re just beginning your savings journey, you’ll find that using one of these accounts can help you make steady progress towards your goals — without needing a big chunk of change to start.
To see just how money grows in a high-yield savings account, CNBC Select used Bankrate’s compound interest calculator to determine how much money you would need to put away each week in order to save $1,000 in just one year.
Here’s how much you would need to save each week
To calculate how much it would take to save $1,000 over a year’s time, we used the Marcus by Goldman Sachs High Yield Online Savings account as an example.
This account ranked as ‘Best Overall’ on CNBC Select’s list of the best high-yield savings accounts for its strong APY, no minimum balance nor monthly fees and its easy-to-use mobile banking app.
Savers with this account currently earn an APY of 1.05% and interest compounds daily. Our calculation assumes that you are starting with $0 in your account and plan to make a deposit each week for one year.
What we found is that you would have to deposit $20 each week to earn an estimated total of $1,046 after 1 year. We used only whole dollar contributions, versus saying $20 and some cents.
In context, this means saving less than $3 per day — which illustrates just how much money can really add up over time in a high-yield savings account. You don’t need to make a big contribution every week, or every day, to save $1,000 in a year.
It’s also worth noting that while high-yield savings account rates still earn you over 16X more money than the national average on traditional savings accounts, their yields are significantly lower than normal right now. Savings account interest rates have dropped to half of what they were last year, in accordance with the Federal Reserve lowering its benchmark rate. But they are sure to go back up again as the economy recovers and the Fed raises its rate.
Our picks for the top high-yield savings accounts
Beyondthe Marcus by Goldman Sachs High Yield Online Savings, there are other options if you’re looking for an account that offers both saving and checking options or one that earns a higher APY.
Ally Bank is a good choice for anyone looking to do all their banking in one place by offering both a checking and savings account, while Synchrony Bank provides account holders with an optional ATM card for convenient withdrawals if you ever need to dip into your savings in an emergency.
And while Vio Bank offers a higher APY of 1.21%, the mobile-only Varo Bank encourages you to save more by automatically transferring money from your paycheck to your savings account, as well as from rounding up your checking account transactions.
Bottom line
No matter your starting point, know that just a little savings each week can earn you money over the years. The longer you keep your money in a high-yield savings account, the larger your balance will be when you ultimately need it.
