Savings Accounts
A savings account is where you park money you do not need right now. The goal is to keep it safe and maybe earn a little interest — but not to invest it or take big risks.
Liquidity vs. Interest: The Trade-Off
Every financial decision involves trade-offs. With savings accounts, the main trade-off is between liquidity (how fast you can access your money) and interest (how much your money grows).
Money you can access immediately (like cash or checking). Great for emergencies, but usually earns little to no interest.
Money that is slightly harder to access (like a HYSA at an online bank). Takes 1-2 days to transfer, but earns much more interest.
Types of Savings Accounts
Pros
- Easy to open at your existing bank
- FDIC insured up to $250,000
- Instant transfers to checking
Cons
- -Very low interest rates
- -Your money barely grows
- -May have monthly fees
Best for: Beginners or keeping a small emergency fund at the same bank as your checking.
Pros
- 10-50x higher interest than standard
- Still FDIC insured
- No monthly fees (usually)
Cons
- -Usually online-only banks
- -Transfers take 1-2 days
- -Rates can change
Best for: Emergency funds, saving for goals, anyone who wants their money to actually grow.
Pros
- Good interest rates
- May include debit card/checks
- FDIC insured
Cons
- -Higher minimum balance required
- -Limited transactions per month
- -May have fees
Best for: Larger balances where you want some access but better rates than checking.
What Is APY?
APY stands for Annual Percentage Yield. It tells you how much your money will grow in one year, including compound interest.
Example: If you put $1,000 in an account with 5% APY:
- After 1 year: $1,050
- After 5 years: $1,276 (compound interest!)
- After 10 years: $1,629
Key Takeaway
If you have money sitting in a standard savings account at a big bank, you are probably earning almost nothing. Moving your emergency fund to a high-yield savings account is one of the easiest financial wins — same safety, much better returns.