This Is How Much Money You Can Make with $20K in a High-Yield Savings Account (2024)

It is valuable to have savings. If you have extra cash in an emergency fund, it'll be easier to pay for unanticipated expenses that come your way. The recommended amount to save varies from person to person, as everyone's financial situation differs.

But for many people, $20,000 is a sizable emergency fund goal that will go far. If you have a large chunk of savings set aside, make sure you keep it in a bank account that earns interest.

Curious how much interest you can make off $20,000? Below, I'll explain how much you can earn with this sum by keeping your cash in a high-yield savings account.

Maximize your earnings with a high-yield savings account

Before opening a savings account, check the annual percentage yield (APY). Banks use this to describe the returns an account holder can expect by keeping their cash in a savings account for one year. Many brick-and-mortar banks offer low APYs, so it's common to see rates as low as 0.01% APY. At that meager rate, you won't earn much at all.

But if you open a high-yield savings account, you'll likely be offered a much higher APY. Many online banks offer 4.00% APY or higher for these accounts. How much interest will you earn by keeping $20,000 in a high-yield savings account? It could be more than you think.

$20,000 in savings accumulates this much in interest

To determine how much interest you'll earn, multiply your initial deposit ($20,000) by the APY your bank account offers. Doing this will show you how much you'd make if you kept your cash in the bank for one year.

For the following calculations, I went with a 0.01% APY for a standard savings account and a 4.50% APY for a high-yield savings account. The bank accounts on our list of the best high-yield savings accounts have APYs ranging from 4.15% to 5.05% -- I settled somewhere in between.

These calculations assume a $20,000 deposit with no additional deposits made to your account:

Source: Author's calculations

As you can see, there is a significant difference in earnings. Keeping a large sum of cash like this in a high-yield savings account would be worthwhile if you hope to maximize the interest you earn.

Compound interest is on your side when it comes to savings

The calculations above show how much interest you can earn by keeping $20,000 in the bank for a year. But you can make more money thanks to compound interest, which is interest that you earn on interest. The longer you keep your money in your savings account, the more you earn.

To give you an idea how you can benefit from compound interest when you have a savings account, here's how much money you'll make if you keep $20,000 in a high-yield savings account for anywhere from one to five years. Again, the following calculations assume you make no additional contributions beyond the initial deposit.

Here's a breakdown:

Source: Author's calculations

That's $4,923.64 -- nearly an additional $5,000 earned in five years, assuming the APY doesn't change. However, APYs can and do change, so your APY likely won't stay at the same rate for five years.

Earn more interest with no extra work

Considering the rates offered, now is an excellent time to open a high-yield savings account. By stashing your cash in a bank account with a higher APY, you can earn more interest without doing any work. Most bank accounts take only a few minutes to open, so it's worth the effort. You can improve your personal finances by boosting your bank account balance with earned interest.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.