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But if you’re dropping money into a traditional savings account instead of a high-yield savings account, you could be shortchanging yourself.
By how much? We’ll get to that in a bit.
It’s pretty common to see the term “high-yield” account described as a "high-interest rate" account, probably because the idea is that you typically get a higher-interest rate that you would with a traditional savings account.
When it comes to savings accounts, interest is the amount of money you earn for leaving your money deposited with a bank. It’s typically expressed as an annual percentage yield (APY), which is the amount of interest you could earn over a year, assuming that funds are not added or withdrawn. APY accounts for compound interest, which is effectively making money on your money. The more often the interest compounds, the more money you could earn.
If you’ve been eyeballing savings accounts, you’ve might have seen both the interest rate and the APY listed for some savings accounts; but the APY tells the fuller story.
Here is a quick way to eyeball the impact that different annual percentage yields can have on your savings goals.
The APYs on some savings accounts might not result in a lot of change to your balance. Check out this chart to see what we’re talking about.
To choose the right account for you, it’s a good idea to gather as much information about the account itself.
Here are a few questions to consider:
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.