How to Earn an Extra $500 a Year on Your Savings
These days, we all could use a little extra cash. Whether you’re struggling to keep up with inflation, feeling the weight of an expensive holiday season or both, you’re probably searching for ways to bring in a bit more money.
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Even better? Finding ways to earn passive income. This might be easier than you think.
If you currently have money in a savings account that’s not earning much interest, moving it to a new location can seriously pay off — to the tune of an extra $500. Find out what you have to gain by parking your funds in the right spot.
What is a High-Yield Savings Account?
Where you put your savings matters. The type of account you choose can mean the difference between earning a notable amount of interest or barely enough to notice.
A high-yield savings account is a great option for your savings. This type of account tends to pay a higher interest rate than the national average of traditional savings accounts.
This type of account typically compounds interest daily, allowing your balance to grow at a rapid pace. You may be limited to a certain number of monthly withdrawals without penalty, but you’ll have full access to your funds — as opposed to CDs, where you have to wait for a maturity date. Plus, most accounts are FDIC-insured, so you can feel confident that your hard-earned money is safe.
How to Earn an Extra $500 a Year on Your Savings
It’s time to put your money to work. Opening a high-yield savings account is one of the easiest ways to earn extra cash.
As of Dec. 22, 2023, the national average rate on savings accounts is 0.46%, according to the FDIC. Jenius Bankᵀᴹ offers a high-yield savings account with a 5.10% APY¹– which is 11 times² the national average on a typical savings account.
So, if you have $10,000 to deposit, in one year, you’ll earn $523.19 in interest. This assumes you won’t make any additional contributions during the year, interest is compounded daily and the interest rate stays the same.
Now, imagine all of these factors remain, but you don’t touch the account for two years. In this case, you’ll earn a total of an extra $1,073.76 — for doing absolutely nothing.
Given the same circumstances, in five years, you’ll earn $2,904.39. Over the course of 10 years, you’ll earn $6,652.32, and in 20 years, you’ll collect $17,729.97.
Clearly, the power of compound interest is rich.
Start Small, Earn Big
It’s very possible you don’t have $10,000 in savings — and that’s OK. Some high-yield savings accounts may require you to meet certain minimum balance requirements to open an account and continue earning interest.
However, Jenius bank does not. As soon as you deposit any amount of money, you’re able to start earning the 5.10% APY on your funds.
So, say you only have $500 to deposit. You’ll still earn $26.16 in interest in one year for doing absolutely nothing. In two years, you’ll have an extra $53.69. This number grows to $145.22 in five years and turns into $332.62 in 10 years.
Maybe you have a little more to invest, such as $5,000. In this case, you’ll earn $261.60 in interest after one year. In two years, you’ll earn $536.88, rising to $1,452.19 in five years and $3,326.16 in 10 years.
Every penny counts. Even if you don’t earn $500 per year in interest, opening a high-yield savings account can still quite literally pay off. Instead of letting your money sit around and essentially collect dust, put it to work collecting as much interest as possible.
Watch Out for Fees
Before opening a high-yield savings account, it’s always important to read the fine print. You’re likely choosing to move your money to this type of account to increase interest earnings, so you don’t want to end up paying extra fees that can add up fast.
Jenius Bank ᵀᴹ doesn’t charge fees of any kind — no monthly maintenance fees, account opening fees or transaction fees. This means the earnings you collect will be strictly profit.
The last thing you want is to inadvertently move your money to a high-yield savings account that costs you more in fees than interest collected. No matter how much you have in savings, this type of account should elevate your interest earnings.
As you can see, there’s a lot of money to be earned with a high-yield savings account. Whether you have $10,000 to deposit right now — allowing you to earn $523.19 in interest over the next year — or just a few hundred dollars, opening this type of account can always make sense.
There’s not too many opportunities to earn money for nothing, with no strings attached. Putting your money in a high-yield savings account is one of the few ways to achieve this, so take full advantage of it.
Jenius Bank is a division of SMBC MANUBANK. Member FDIC.
¹ Annual Percentage Yield (APY) as of 12/22/2023 and subject to change at any time.
² The national average rate is accurate as of 12/22/2023 from the FDIC National Rates and Rate Caps for Savings deposit products.
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This article originally appeared on GOBankingRates.com: How to Earn an Extra $500 a Year on Your Savings
