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MoneyWatch: Managing Your Money

By Angelica Leicht

Edited By Matt Richardson

/ CBS News

Having a solid savings plan in place is a smart idea in any economy, but it's especially important in an uncertain one. And, right now, we're in the midst of uncertainty due to persistent inflation, elevated interest rates and other unusual economic circumstances — so it's time to shore up any loose ends with your savings.

For example, if you're keeping your money in a regular savings account, you should consider moving it to another type of account instead. One smart option is a high-yield savings account. Right now, regular savings accounts offer an average rate ofjust 0.45%. High-yield savings accounts, on the other hand, typically provide significantly higher interest rates.

And, due to the elevated rate environment, high-yield savings account rates can beas high as 5% or morecurrently. This means your money works harder for you, increasing your wealth over time. But how much will you earn per year with a high-yield savings account if you deposit $100,000?

Explore the top savings rates available to you here and crunch the numbers.

**How much will $100,000 earn in a high-yield savings account?**

The earnings you can make on a $100,000 deposit into a high-yield savings account can vary, sometimes drastically, depending on small changes to the interest rate — and whether the interest compounds monthly or annually. Let's take a look.

**Example 1: $100,000 at 4.25%**

At a 4.25% annual interest rate, your $100,000 deposit would earn a total of $4,250 in interest over the course of a year if interest compounds annually.

**Annual total:**$104,250.

But let's say interest compounds monthly instead. With monthly compound interest, you would earn a total of $4,334 over the course of a year.

**Annual total:**$104,334

**Example 2: $100,000 at 4.50%**

With a 4.50% interest rate, your $100,000 would generate $4,500 if the interest compounds annually.

**Annual total:**$104,500

Now let's look at the difference in earnings if interest is compounding monthly. With monthly compound interest, the total earnings for the year would be $4,594.

**Annual total:**$104,594

As you can see, the slight increase in interest from 4.25% to 4.50% can make a big difference in your savings over time — and so can the addition of monthly compound interest.

**Example 3: $100,000 at 4.75%**

At this interest rate, your $100,000 could earn you an impressive $4,750 in interest if it compounds annually.

**Annual total:**$104,750

Now let's factor in monthly compound interest instead. At the 4.75% rate, the total earnings for the year would be $4,855 — a difference of over $100 over the course of 12 months.

**Annual total:**$104,855

Keep in mind that rates this high may be less common and can be associated with certain restrictions or requirements.

**Example 4: $100,000 at 5.00%**

A 5.00% interest rate can significantly boost your savings. At this rate, your initial $100,000 would accrue $5,000 in interest each year.

**Annual total:**$105,000

But monthly compound interest would boost that total even further. At the same 5.00% rate, monthly compound interest would result in a total of $5,116 at the end of the first year.

**Annual total:**$105,116

This rate is an attractive option for those who want their money to work harder for them — especially when monthly compound interest is factored in.

Find out how much you could earn with a high-yield savings account.

**Comparison of earnings**

Let's compare the earnings at these different interest rates over time. Keep in mind that these calculations assume that you don't add or withdraw any money.

**Annual compound interest earnings:**

- At 4.25%, your $100,000 would earn $4,250 per year
- At 4.50%, your $100,000 would earn $4,500 per year
- At 4.75%, your $100,000 would earn $4,750 per year
- At 5.00%, your $100,000 would earn $5,000 per year

**Monthly compound interest earnings:**

- At 4.25%, your $100,000 would earn $104,334 per year
- At 4.50%, your $100,000 would earn $104,594 per year
- At 4.75%, your $100,000 would earn $104,855 per year
- At 5.00%, your $100,000 would earn $105,116 per year

Over a 1-year period, the differences in earnings might not seem significant, but over time, the impact can be substantial. The power of compounding means that your initial $100,000 investment can grow even more when the interest is reinvested.

**Variable nature of high-yield savings account rates**

While the earnings with a high-yield savings account can be substantial, it's crucial to understand that high-yield savings accounts havevariable interest rates. Unlike CDs, which offer fixed interest rates for a set term, high-yield savings account rates can change at any time.

These rates are often influenced by factors such as economic conditions, inflation and the decisions of the individual financial institution. Therefore, the interest you earn on your savings can go up or down over time.

To maximize your earnings in a high-yield savings account, stay informed about interest rate changes and consider periodically reviewing and possibly switching to an account with a better rate if available.

**The bottom line**

High-yield savings accounts provide an excellent option for individuals looking to earn more on their savings while maintaining easy access to their funds. The amount your $100,000 can earn in such an account depends on the interest rate, with rates ranging from 4.25% to 5.00% or even higher. But while a higher interest rate can significantly impact your savings, remember that these rates are subject to change.

And, when choosing a high-yield savings account, consider factors beyond just the interest rate, such as account fees, minimum balance requirements and the financial institution's reputation. Diversifying your savings strategy with other investment options, such as stocks or bonds, can also help you achieve your long-term financial goals.

Angelica Leicht

Angelica Leicht is senior editor for CBS' Moneywatch: Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.