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How High-Yield Savings Accounts Work

Here’s how a high-yield savings account actually works — and how to get one working for you.

You may have been told that your savings account is not just a place to park money, but a place for it to grow. Maybe you’ve heard that your traditional savings account is paying way less in interest, and a high-yield savings account could earn more than twice as much. 

A high-yield savings account works just like a standard savings account, and there are clear-cut reasons some banks can offer such high APYs. 

Earn High Returns with Growth Savings

Growth Savings is a high-yield savings account built for people who want their money to work harder. No monthly fees, unlimited transfers, and a rate that leaves traditional savings in the dust.

Open a Growth Savings Account

Here’s how high-yield savings accounts like Forbright Bank Growth Savings work:

How the Math Works 

When you deposit money into a savings account, the bank borrows your funds and pays you an agreed-upon rate of interest. As you keep your funds in the account, you earn interest on your original deposits as well as the interest you’ve earned over time. This is called compound interest.  

The defining feature of a high-yield savings account is its Annual Percentage Yield (APY). Unlike a simple interest rate, APY accounts for compounding. A savings account with a 3.00% APY, compounded monthly, will outperform one with a 3.00% simple interest rate.   

A high-yield savings account like Growth Savings typically calculates interest daily based on your current balance and then credits it to your account monthly. The next day, you earn interest on your original deposit plus the interest you just earned, causing your money to grow at an accelerated rate. 

Benefits of a High-Yield Savings Account 

When you keep money in a high-yield savings account like Growth Savings, you can experience benefits like:  

  • Passive earnings. Every dollar kept in the account earns interest, allowing your emergency fund or short-term savings to build over time. 
  • Safety. High-yield savings accounts at FDIC-insured banks are federally insured up to $250,000 per ownership category. 
  • Flexibility. High-yield savings accounts let you transfer funds as needed, and Growth Savings allows unlimited transfers without fees. 
  • Digital experience. Because high-yield savings accounts tend to be offered by online banks, you can expect a digital banking experience.  

Your Savings Deserve a Better Return 

The gap between what a traditional savings account pays and what a high-yield savings account like Growth Savings pays is significant. Over time, it can be thousands of dollars. If your savings are sitting in a low-rate account right now, the case for switching is easy to make: more savings, no fees, and a user-friendly digital experience. You work hard for your money. Make sure your money is working hard for you. 

Disclaimer: This article is for general information and education only. It should not be considered financial or tax advice. 

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