Image source: The Motley Fool/Upsplash
If you have $30,000 to save, consider stashing it in a high-yield savings account (HYSA) for potential gains. Currently, many HYSAs offer an attractive 4.00% APY. But what does this mean for your money in the long run?
In search of a secure avenue to grow your savings? Explore our expert recommendations for the top FDIC-insured high-yield savings accounts available today, offering competitive rates for peace of mind.
Let’s delve into the details.
How much can you earn over time?
Your savings can flourish through compound interest, allowing you to earn interest not only on your initial deposit but also on your accrued earnings. Here’s an overview of how a $30,000 deposit would accumulate with a 4.00% APY if left untouched:
1 year: $1,200 in interest
5 years: $6,500 in interest
10 years: $14,407 in interest
20 years: $35,734 in interest
After two decades, your initial $30,000 investment could more than double to $65,734, simply by leaving it untouched in the account.
Admittedly, savings account APYs are subject to fluctuations. Your actual returns over the years may vary above or below 4%. Nevertheless, this illustrates the impact of compound interest at play.
Interested in earning well above the national average APY? Review our selection of the best high-yield savings accounts, and you could open a new account within minutes.
Is a high-yield savings account the optimal choice for your funds?
A high-yield savings account proves advantageous for short-term savings and emergency funds, ensuring the safety of your deposits with FDIC insurance while allowing for flexible withdrawals.
However, for longer-term ambitions, you may wish to explore alternative avenues with greater potential returns:
Treasury Bonds:
Government-backed treasury bonds offer security and high yields for those willing to invest for an extended period. With recent interest rates on 20-year Treasury bonds at 4.625%, a $30,000 investment could yield $44,102 in interest over two decades.
The Stock Market:
The stock market has historically delivered an average annual return of around 10% (before inflation) through the S&P 500 Index. Even if future performance differs, returns could surpass those of any savings account. For example, investing $30,000 in an S&P 500 index fund with a 7% average annual return could yield:
1 year: $2,100
5 years: $12,077
10 years: $29,015
20 years: $86,091
This would result in a portfolio worth $116,091 after 20 years.
Stocks can be volatile, experiencing short-term losses; however, long-term investing has historically outpaced savings accounts. For significant,
We stand firmly by the Golden Rule, which is why our editorial opinions are exclusively ours and have not gone through prior review, approval, or endorsement by featured advertisers. Please note that Motley Fool Money does not encompass all available offers in the market. The editorial content provided by Motley Fool Money is distinct from The Motley Fool’s editorial content and is developed by a separate team of analysts. The Motley Fool upholds a disclosure policy to maintain transparency and integrity.
