Why you should use a high-yield savings account over a regular savings account: A comprehensive comparison

When it comes to saving money, it’s important to choose the right type of account. Savings accounts tend to have different features, advantages, disadvantages, and personal finance decisions that go into where to keep your cash. In this post, we’ll compare the two types of accounts:

Regular savings accounts

Regular savings accounts are the most basic type of savings account. They are offered by traditional banks and credit unions and have lower interest rates than high-yield savings accounts.

High-yield savings accounts

High-yield savings accounts are savings accounts that offer higher interest rates than regular savings accounts. These accounts are offered by online banks and other financial platforms and offer a range of additional features, including online banking and mobile apps.

Both types of accounts are typically FDIC-insured and include ways to easily access your funds.

Features of regular savings accounts

Regular savings accounts are similar to high-yield savings accounts in most ways with a few big exceptions.

• Lower interest rate: Compared to high-yield savings accounts, regular savings accounts offer a lower interest rate.
• Easy access to funds: Regular savings accounts offer easy access to your funds, allowing you to make deposits and withdrawals at any time.
• FDIC-insured: Regular savings accounts are typically FDIC-insured, providing protection for your savings up to $250,000 per account. And in some cases, FDIC insurance will cover more than $250,000.

Features of high-yield savings accounts

High-yield savings accounts include higher interest rates, possibly more advanced technology, and are FDIC-insured. 

• Higher interest rate: The most significant difference between high-yield savings accounts and regular savings accounts is the interest rate. High-yield savings accounts typically offer a higher interest rate much higher than the national average for savings accounts, which in turn offers the potential for higher returns.
• Advanced technology: High-yield savings accounts can usually be found on financial platforms that may offer other unique features such as brokerage accounts and borrowing seamlessly integrated into the platform.
• FDIC-insured: Like regular savings accounts, high-yield savings accounts are FDIC-insured, which means your savings are protected up to $250,000 in case of bank failure. 

Personal finance decisions

Ultimately, your finances are up to you. Where you decide to save can depend upon your own savings goals, time horizon, risk tolerance, and accessibility.

Savings goals: Consider your savings goals and how quickly you need to reach them when choosing between a high-yield savings account and a regular savings account.

Time horizon: If you have a longer time horizon for your savings, a high-yield savings account may be a better choice, as the higher interest rate can result in higher returns over time.

Accessibility to funds: Do your research before choosing a savings account. Easy access to funds can depend on the platform you save with. Also consider the other products the platform offers if you want all of your money in one place. M1 offers a suite of accounts and tools to help you manage your money. And with Smart Transfers, M1 Plus clients have access to threshold-based rules to automatically transfer money between their M1 accounts. These rules can be set to work between various M1 accounts, such as a checking account, an IRA, and a taxable portfolio, and can be used to maintain minimum or maximum balances, invest excess money, or transfer money between accounts.

The bottom line

Choosing the right savings account can have a significant impact on your financial future. Consider the different features, advantages, disadvantages, and personal finance decisions for yourself before moving your money.

High-yield savings on M1

We announced a high-yield savings account for our users to begin earning a competitive 4.50%* APY return on their cash. Learn more here.

*Obtaining stated APY (annual percentage yield) or opening an account does not require a minimum account balance. Stated APY is valid from date of account opening. Account fees may reduce earnings. Variable APY rate subject to paid M1 Plus subscription. Stated APY (annual percentage yield) for M1 Savings accounts is subject to change prior to product launch due to changing federal funds rate. 

M1 Spend is a wholly-owned operating subsidiary of M1 Holdings Inc. M1 is not a bank. M1 Savings Accounts are furnished by B2 Bank NA, Member FDIC.