Saving accounts are essential for most people looking to build their wealth, but with so many options out there to choose from, it can be challenging to choose the right one.

One of the major factors that can impact your choice of savings account is the Annual Percentage Yield (APY).

This metric can significantly impact the interest earned on your savings, and it is crucial to understand it before making a decision.

In this article, you’ll explore the impact of APY on your choice of savings account and provide tips to help you find the best high APY savings account.

What is APY?

APY is a term that refers to the annual interest rate earned on a savings account, expressed as a percentage of the account balance. It is the rate of return you can expect to earn on your savings account over a year, including the impact of compounding interest.

It is important to understand that APY is not the same as the interest rate, which only refers to the interest earned without considering compounding.

Why Does APY Matter?

APY matters because it impacts the interest you will earn in your savings account. A higher APY means that you will earn more interest on your savings, and this can help you grow your wealth faster.

On the other hand, a lower APY means that you will earn less interest on your savings, which can slow down the growth of your wealth.

How to Find High APY Savings Accounts

To find high APY savings accounts, you need to compare the APY offered by different banks and financial institutions. Some banks offer higher APYs than others, so shopping around is essential to find the best deal. Here are a few tips to help you find high APY savings accounts:

Check online banks: Online banks often offer higher APYs than traditional brick-and-mortar banks. This is because they have lower overhead costs, which enables them to offer higher interest rates to their customers.
Compare APYs: Compare the APYs offered by different banks and financial institutions to find the best deal.
Read the fine print: When choosing a savings account, make sure to read the fine print and understand the terms and conditions. Some banks may have restrictions or penalties for early withdrawals or low balances, which can impact the amount of interest you earn.
Look for promotions: Some banks offer promotions for opening a new savings account, such as a sign-up bonus or a promotional APY.

What to Consider When Choosing a High APY Savings Account

When choosing a high APY savings account, there are a few key factors to consider. SoFi advisors say, “Open a savings account made to grow with you.” Here are a some points to keep in consideration:

Account fees: Some savings accounts may have account fees, such as monthly maintenance fees or account closing fees.
Minimum balance requirements: Some savings accounts may have minimum balance requirements, and you must meet these requirements to be eligible for the high APY.
Ease of access: Make sure to choose a savings account that is easily accessible, such as one that offers online or mobile banking.

Understanding the impact of APY on your choice of savings account is crucial to help you make an informed decision. By finding a high APY savings account, you can earn more interest on your savings and grow your wealth faster.