Keeping an Extra $1K in Your Checking Account? Here’s Where You Should Move It

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If you keep an extra $1,000 in your checking account, you likely won’t earn interest. Find out where to keep your savings and learn how much you can earn. 

Keeping some extra money in your checking account is not a bad idea. Doing this can ensure you have enough funds to cover your everyday expenses and give you additional wiggle room. But keeping all your extra money in a checking account isn’t the best financial strategy.

Why? Since most checking accounts don’t earn interest, you won’t have the opportunity to boost your bank account balance in this way. Interest can add up quickly, and any extra money earned is a win for your personal finances.

Do you have an additional $1,000 sitting in your checking account? Find out why you may want to transfer that money to a high-yield savings account soon.

Interest can help you boost your bank account balance

Most checking accounts don’t offer interest or rewards. That means there’s little incentive to keep your savings here. But if you keep your emergency fund in a bank account that earns interest, your money will grow over time without doing any work.

As you research savings accounts, pay attention to the annual percentage yields (APYs) you see. Banks use APY to describe the returns you can expect when keeping your money in a savings account for one year. Rates can vary significantly, so it’s best to compare accounts to choose the right one.

You may be missing out on extra cash

Are you wondering how much interest you’re missing out on by an extra $1,000 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 $1,000 in a high-yield savings account for one year.

To determine how much interest you’ll earn, multiply your deposit ($1,000) by the APY. This will show you how much you’d earn if you kept it all in your savings account for a year.

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 settled somewhere in between.

Compound interest is on your side

While $45 may not seem like a ton of money, it’s much better than earning $0. Life is expensive, so an extra $45 earned is a big deal. The longer you keep your savings in the bank, the more you can make, thanks to compound interest, which is interest that you earn on interest.

To illustrate the power of compound interest, I’ll show you how much money you can make if you keep your initial $1,000 deposit in a high-yield savings account for anywhere from one to three years.

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

Here’s a breakdown of the potential earnings:

That’s $141.17 earned in three years, assuming the APY on your account doesn’t change. It’s worth noting that APYs can change over time, so your APY likely won’t stay the same rate forever. Now you can see why keeping your extra savings in an interest-earning bank account is a good strategy.

Do this to boost your savings account balance

Saving for emergencies is wise. If you have a savings stash, make sure you’re not missing out on interest. By opening a high-yield savings account and keeping your savings there, you can increase your bank account balance as you earn interest. But if you keep every last cent in your checking account, you’ll miss out.

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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