Is a High Yield Savings Account the Best Place for My Money After Paying Bills?
Your Money Questions Answered
I want to improve my finances and I heard that I should open a high yield savings account. I have a regular savings account. Do I need a high yield savings account too? Is one better than the other? Where do you open a high yield savings account? Is this the best place to put any money I have after paying bills or is there something else I should do to maximize my savings?
The Short Answer
A high yield savings account (HYSA) works just like a regular savings account, but pays significantly more interest—making it the better choice for most people
You probably don't need both; a HYSA can simply replace your regular savings account
HYSAs are available at many banks and credit unions, both online and traditional; look for one that is FDIC or NCUA insured
A HYSA is a great place to keep savings, but where you put your money depends on what it's for—and most people need to be saving for three different purposes at once
There's no one right answer for how to prioritize savings; it depends on your goals, your situation, and what makes you feel financially secure
Great question — and the fact that you're asking it means you're already thinking about making your money work harder. Let's take it piece by piece.
Do you need both a regular savings account and a high yield savings account?
Short answer: no, and a HYSA is the better option. A high yield savings account works just like your regular savings account — you can put money in and take it out whenever you need to — except it pays you significantly more in interest. If you have money sitting in a regular savings account earning next to nothing (we're talking fractions of a percent), a HYSA is almost always a better place for that same money.
Where should I open a high yield savings account?
HYSAs are available at a wide range of banks and credit unions, including both online banks and many traditional brick-and-mortar institutions. Rates vary quite a bit, and the reason comes down to competition for deposits. Large national banks already have massive customer bases, so they don't have to offer you much to keep your money — and they often don't. Smaller banks, online banks, and credit unions tend to be more motivated to compete for deposits, which is why they often pay higher rates. Online banks also tend to have lower overhead with no physical branches to maintain, and they pass some of that savings on to customers.
Because rates change frequently, I won't list specific banks here. Sites like Bankrate.com and NerdWallet.com maintain updated lists of the best HYSA rates and are a great place to start your research. (But keep in mind that they are making money from their recommendations.)
Just make sure whatever institution you choose is FDIC insured (or NCUA insured for credit unions) — that means your money is protected up to $250,000, regardless of whether you can walk through the front door or not.
For more on what to look for when choosing a bank, see How to Choose a Bank. And if you're wondering how a HYSA compares to other savings options like CDs, this post breaks it down.
Is a high yield savings account the best place to put your extra money?
This is where "it depends" is genuinely the right answer — and I'd be doing you a disservice to pretend otherwise.
Where you put your money depends on your goals, your overall financial situation, what makes you feel secure, and a whole range of factors that are specific to you. There's no one universal right answer here. (Assuming you don't have consumer debt to pay off—if you do, that changes the equation significantly. Here’s a good place to start if you need help paying off your debt.)
That said, it helps to think about savings in three categories—because most of us actually need to be saving for three different purposes at the same time. And where you put that money depends on what it's for.
1. Money to protect yourself
This is what most people call an emergency fund, but I think that framing undersells what it really is. It's money you keep on hand that isn't earmarked for anything specific — it's just there so that when something comes up, you can handle it without derailing everything else.
This money also increases your general sense of financial security because you can trust that things will be (more) okay no matter what happens. It also gives you more freedom and flexibility in life. For example, let's say you want to leave a bad situation, start a business, stay at home with your kids, or move closer to family. Having money on hand makes it easier to do that.
It's hard to say what the right amount is, but here's something to consider: if you lost your source of income tomorrow, how long would you want to be able to pay your bills before you absolutely had to figure out a replacement? A month? Three months? Six months? A year?
That answer is different for everyone, and it depends on things like how secure your job feels, whether you have a partner or family contributing income, what your expenses are, and what would help you sleep at night.
A HYSA is an excellent place to keep this money. It stays liquid (meaning you can access it when you need it), and it earns more than a traditional savings account while it sits there.
A quick note: a HYSA is a good option, but it's not the only one. Depending on current economic factors, you might find higher rates with CDs, money market funds, or other savings options. But if you're not up to exploring all of that right now, just find a high yield savings account with a decent interest rate and good reviews and go with it. Don't overthink this — just get started.
2. Money for specific upcoming expenses
Beyond your protective cushion, you also need to be saving for things you can anticipate — even if you don't know exactly when or how much they'll cost. Things like travel, car maintenance, home repairs, holiday spending, a new appliance, or a big medical expense are predictable in the sense that you know something like them will happen, even if you can't predict the specifics.
Saving for these separately from your general backup fund is a game-changer, because it means you're not constantly raiding the same pot of money and wondering if you'll have enough. This is where savings buckets or sinking funds come in. For a full breakdown of how to set this up, read [How to Deal with Unexpected Expenses].
A HYSA works well for this kind of savings too, particularly if your bank allows you to open multiple savings accounts or sub-accounts that you can label by purpose.
3. Money for the future
Finally, there's long-term savings, primarily for retirement. If your employer offers a 401(k) match and you're not contributing enough to get the full match, that's the most straightforward place to start, because it's essentially part of your compensation. Beyond that, the right approach depends on your age, your goals, your tax situation, and a number of other factors. This is where talking to a financial planner starts to make sense for big-picture decisions.
The important thing to remember is that a HYSA is not a good place to keep your retirement savings, especially if retirement is still a long way off. Why? Because your money won't have a chance to grow enough. Many people avoid investing because they're afraid of losing money, but there's another risk that's easy to overlook: if you don't invest, you may not end up with enough to retire. If the risk of investing worries you, a financial planner can help you build a strategy you actually feel comfortable with.
If your employer has a workplace retirement plan, that's often a good place to start, especially if they offer a match. IRAs and Roth IRAs are also worth exploring. These are special accounts with tax advantages that you can open on your own.
How to balance all three
Honestly, this is the question that doesn't have a clean answer — and anyone who gives you a rigid step-by-step order is oversimplifying it. How you balance these priorities depends on your age, your income, your job security, what other resources you have, what your goals are, and what genuinely worries you most about money.
What I'd encourage you to do is think about where you're most vulnerable right now.
Is it that you have almost nothing set aside if something goes wrong?
Is it that you're not saving anything for retirement?
Is it that every holiday season or car repair catches you off guard
Start there, even if it's just a small amount, and build from there.
And remember, it doesn't have to be all or nothing. You can absolutely work on all three at once. In many cases, that's the best approach of all.
Frequently asked questions about high yield savings accounts
Is a high yield savings account worth it?
Yes, for most people. If you have money sitting in a regular savings account earning almost nothing, moving it to a HYSA is a simple, low-effort way to earn more on money you're already saving. The main downside is the small amount of time it takes to research and open a new account, which is usually well worth it.
How much should I keep in a high yield savings account?
There's no single right answer. The amount depends on what you're saving for. At minimum, most financial coaches and planners recommend having enough set aside to cover your bills for at least one month if your income disappeared— and ideally more, depending on your situation. Beyond that, it's a good place to keep savings for specific upcoming expenses and financial goals.
Is a high yield savings account better than a CD?
It depends on whether you need access to the money. A HYSA lets you withdraw anytime, while a CD locks your money in for a set period in exchange for a potentially higher rate. If there's any chance you'll need the funds before the term ends, a HYSA is the safer choice. For a full comparison, read CDs vs. High Yield Savings Accounts: Which is Better?
Do you want help figuring out how to balance your priorities and how much to save for various purposes? I can help you make a money plan that gives you confidence that you have enough for bills and day-to-day spending, protects you when things go wrong, and sets you up for the future. Schedule a free chat with me to learn more.
