How much could you earn if you put $20,000 in a high-yield savings account?
You may be wondering if it is worth opening a high-yield savings account. How much interest will you actually earn? What if the Federal Reserve cuts interest rates?
As with most investments, the biggest returns in high-yield savings accounts go to those who start with a larger opening balance. If you only have $100 in savings, you won’t see much return. However, if you have a decent-sized emergency savings fund with a few months’ worth of income (say, $20,000 in cash), opening one of the best savings accounts starts to become a more profitable option.
Let’s see how much you could earn by investing $20,000 in a high-yield savings account.
Save $20,000: See how much you can earn with 5.00% APY
Having $20,000 in cash is a healthy savings. According to a recent survey by The Motley Fool Ascent, the average American has only $8,000 in the bank. That includes checking, savings, and other “transactional accounts.”
Our picks for the best high-yield savings accounts in 2024
American Express® High Yield Savings  Annual average 4.25%
Rate Information
Annual yield of 4.25% as of July 29, 2024 FDIC member. | Annual average 4.25%
Rate Information
Annual yield of 4.25% as of July 29, 2024 | Minimum income 1 dollar |
UFB Portfolio Savings Account  Annual average 5.15%
Rate Information
To continue to receive the highest interest rates from UFB, you should keep an eye on the rates. Sometimes banks open new accounts with higher rates. You should contact your bank and ask them to transfer your existing accounts to one of these new accounts. FDIC member. | Annual average 5.15%
Rate Information
To continue to receive the highest interest rates from UFB, you should keep an eye on the rates. Sometimes banks open new accounts with higher rates. You should contact your bank and ask them to transfer your existing accounts to one of these new accounts. | Minimum income 0 dollars |
Western Alliance Bank High Yield Savings Premier  Annual average 5.31%
Rate Information
5.31% Annual Percentage Yield (APY) is accurate as of July 11, 2024 and is subject to change at the discretion of the bank. The minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Minimum income $500 upon opening, max APY $0.01 FDIC member. | Annual average 5.31%
Rate Information
5.31% Annual Percentage Yield (APY) is accurate as of July 11, 2024 and is subject to change at the discretion of the bank. The minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. | Minimum income $500 upon opening, max APY $0.01 |
If you have $20,000 that you don’t need for your monthly bills, putting that cash in a high-yield savings account is a good option. The best savings accounts currently pay 5.00% APY (or higher). The national average savings account is just 0.45%, while some of the lowest-yielding bank savings accounts offer just 0.01% APY.
Find out how much more you could earn by investing $20,000 in one of the best savings accounts compared to two other lower-yielding options.
hour | Lowest yielding account | National average savings account | Best Savings Accounts |
|---|---|---|---|
6 months | 1 dollar | $44.95 | $493.90 |
one year | 2 dollars | 90 dollars | $1,000 |
2 years | 4 dollars | $180.41 | $2,050 |
3 years | 6 dollars | $271.22 | $3,152 |
Data source: Authors’ calculations
Leaving $20,000 in savings in the bank for a few years can earn you significant interest. You could lose thousands of dollars If you put your savings in the wrong account.
What if the Fed cuts rates?
“But wait,” you might think. “Savings account APYs aren’t fixed like CDs. Savings account APYs can change at any time. There’s no guarantee that you’ll earn 5% APY on your savings account for one year, much less three! And there’s a chance that the Federal Reserve will cut the federal funds rate, which will likely cause your savings account APY to go down, too!”
That’s pretty insightful and financially wise! Yes, savings account APYs can change, but a high-yield savings account is still a great place to park $20,000 in cash, even when the federal funds rate is low.
Here are some (hypothetical) examples of how much you could earn if you left $20,000 in your savings account after the Federal Reserve cut interest rates.
(For these APYs, we assume today’s best savings account rate of 5.00% minus the 0.25%, 0.50%, or 1.00% chance of a future Fed rate cut.)
hour | Account A | Account B | Account C |
|---|---|---|---|
6 months | $469.49 | $445.05 | $396.08 |
one year | $950 | 900 dollars | 800 dollars |
2 years | $1,945.12 | $1,840.50 | $1,632 |
3 years | $2,987.52 | $2,823.32 | $2,497.28 |
Data source: Author’s calculations
No one knows if, when, or how much the Fed will cut rates. The Fed can only cut the federal funds rate by 0.25% initially. But even if the Fed cuts by 1.00%, the best savings account is still worth it. With $20,000 in savings, you can earn $800 a year even if the best savings account pays “only” 4.00% APY. That’s about $200 less than what the best 5% savings account pays today.
conclusion
$20,000 is a lot of cash savings. It’s more than most Americans have. But if you have a healthy balance in your bank account, make sure you’re getting the return you deserve. The lowest-yielding bank accounts may only give you $2 a year for $20,000 in savings. You could be missing out on hundreds (or thousands) of dollars.
And don’t worry about the Fed cutting rates. Even if rates fall soon, it’s still worth it to get every bit of return you can from your savings. Banks have to pay you for your deposits. Don’t let your money sit in a zero-interest account.
These savings accounts are FDIC insured and can earn 14 times the return of bank deposits.
Many people are missing out on guaranteed returns by dumping their money in big bank savings accounts that pay little or no interest. We chose Best Online Savings Accounts You can earn returns up to 14 times the national average savings account interest rate. Click here Discover the best-in-class accounts that made our short list of the best savings accounts for 2024.
