High-yield savings accounts have gained popularity over recent years. They provide a safe place to store your money while earning interest that's considerably better than traditional savings accounts.
However, with changing economic conditions, especially after the Federal Reserve lowered interest rates in late 2024 and early 2025, people are now wondering whether these accounts are still a smart financial move.
According to financial experts, high-yield savings accounts are still worth considering—especially when used wisely.
Why High-Yield Savings Accounts Still Outperform Traditional Accounts
Traditional savings accounts typically offer a very low annual percentage yield (APY)—on average, only about 0.42 percent.
This means your money barely grows while sitting in the bank. On the other hand, high-yield savings accounts provide much higher APYs, often near or above 4 percent, depending on the bank.
Certified financial planner Ryan McLin from Impact Wealth Group explained the advantage of these accounts in simple terms: "High-yield savings accounts do what most traditional accounts don't—help your money grow. With rates often 10 times higher than regular savings accounts, they're perfect for emergency funds and cash reserves."
Here’s an example to illustrate:
- If you deposit $10,000 into a traditional savings account, you’ll earn around $211 in interest over five years.
- But if you put the same amount into a high-yield savings account with a 4 percent APY, your earnings after five years could exceed $2,200.
Interest Rates Are Still High
The APYs offered by high-yield savings accounts are variable, meaning they change depending on the Federal Reserve's benchmark interest rates.
While the Fed has started lowering rates, many online banks are still offering competitive APYs because they’re trying to attract deposits.
Michael Rodriquez, a certified financial planner from Equanimity Wealth, explained:
"Online banks are keeping rates high as they compete for deposits. It’s one of the few good opportunities in today’s uncertain economy."
Even though high-yield accounts are appealing for their guaranteed returns and zero risk, they’re best suited for short-term savings—not for growing long-term wealth.
Not a Tool for Building Wealth
Ryan McLin emphasized that high-yield savings accounts shouldn’t replace investments like stocks or bonds when planning for the long term.
"High-yield accounts aren’t about growing wealth—they’re about keeping your accessible cash from losing value over time," McLin explained.
Here’s the key takeaway:
- While the S&P 500 has an average annual return of around 10 percent over time, high-yield savings accounts typically max out at about 5 percent.
- For building wealth or saving for retirement, you’ll want to focus on stocks, bonds, or index funds. Use high-yield savings accounts as a tool to protect your emergency funds and short-term savings.
Final Thoughts
Even in 2025, high-yield savings accounts remain a strong option for parking accessible cash that you may need soon. They aren’t a substitute for long-term investments but still play a critical role in a solid financial foundation.
By using these accounts strategically, you can ensure your savings work harder for you without taking on any risk.
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Read more: How Much Money Should You Save at Every Age?
