Keeping an Extra $10K in Your Checking Account? Here’s Where You Should Move It

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If you stash an extra $10,000 in your checking account, you likely won’t earn interest. Find out where to keep your savings and see how much you can earn. 

Many people keep some extra cash in their checking accounts. That’s not a bad strategy to ensure you have enough cash to cover your bills and give yourself extra wiggle room. But keeping all your extra money in a checking account isn’t the best move.

Why? Many of the best checking accounts don’t earn interest, so you won’t have the opportunity to grow your money. Interest can add up quickly and can help to improve your personal finances. Do you have an additional $10,000 stashed in your checking account? Discover why you may want to transfer your savings to a high-yield savings account.

Interest can help you boost your bank account balance

As mentioned above, the average checking account doesn’t offer interest or rewards. That means there’s little incentive to keep your savings here. But if you instead keep your emergency fund in a bank account that earns interest, your money will grow over time.

When researching savings accounts, paying attention to the annual percentage yield (APY) is essential. Banks use APY to describe the returns customers can expect when keeping their money in their savings accounts for one year. Since some banks offer higher rates than others, you’ll want to compare rates before opening a new account.

Don’t miss out on hundreds of dollars in interest per year

Are you wondering how much interest you’ll miss out on by an extra $10,000 in your checking account? It may be more than you think. Below, I’ll show you how much money you could earn by stashing an extra $10,000 in a high-yield savings account for one year.

To determine how much interest you’ll earn, multiply your deposit ($10,000) by the APY. This will show you how much you’d earn if you keep it all in your savings account for a year. If you take some money out before then, you’ll earn less.

I used a 4.50% APY for a high-yield savings account for the following calculations. The bank accounts on our best high-yield savings accounts list have APYs ranging from 4.15% to 5.25% — so I went with a number somewhere in between.

Earn even more the longer your money sits

I don’t know about you, but I’d rather earn $450 in a year instead of $0. That’s a lot of cash! Transferring your savings to an interest-earning bank account can be especially worthwhile when you have a large chunk of cash in your emergency fund.

But you can make even more with compound interest, which is interest that you earn on interest. To better show the benefit of compound interest, I’ll outline how much money you can make if you keep your initial $10,000 deposit in a high-yield savings account for anywhere from one to three years.

The following calculations assume you make no additional contributions beyond your initial deposit. You can earn even more if you continue to deposit money into your account. If you plan to contribute money regularly, we recommend automating the savings process for simplicity.

Here’s a breakdown of the potential earnings:

That’s $1,411.66 earned in three years, assuming the APY doesn’t change. It’s worth mentioning that APYs can change over time, so your APY likely won’t stay the same rate forever. It pays to transfer your emergency fund stash to a high-yield savings account.

This one money move can be a massive win for your finances

Do you have an extra $10,000 in your checking account? You may want to open a high-yield savings account. You could lose hundreds or even thousands of dollars in interest by keeping your extra money in the wrong bank account. Don’t miss out on free money.

These savings accounts are FDIC insured and could earn you 12x 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 can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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