Is a high-yield savings account worth it for small deposits?

For those who were hoping for a new interest rate environment to start in 2024, the wait may be a little longer than anticipated. After the latest inflation report showed inflation ticking up again in December, the expected interest rate cuts to come in 2024 were likely put off for a bit longer — assuming they come at all this year. 

And while higher rates aren't ideal for borrowers, they have been a major boost for savers during the last two years. Specifically, savers can earn exponentially more with high-yield savings and certificates of deposit (CD) accounts than they could have secured just a few years ago.

However, the success of these accounts is primarily determined by two factors: the rate the account comes with and the amount of money you deposit (both to open the account and to keep it funded). This leads to an analysis of deposits and has many savers wondering if a high-yield savings account is worth it, even if they only plan to deposit a small amount of money.

Not sure if a high-yield savings account is worth it for you? Start exploring your options here to find out more.

Is a high-yield savings account worth it for small deposits?

The short answer to this question is yes, a high-yield savings account can be worth it even if you plan on making minimal deposits. But the reasons why are more nuanced. Specifically, a high-yield savings account can be valuable even for small deposits for all of the following reasons:

The interest rate is better

If you've been keeping your money, no matter the amount, in a regular savings account then you've already lost out on significant earnings. Considering the average interest rate on a regular account is just 0.47% (according to the FDIC) and that you can get 4% or higher with a high-yield account, it's easy to understand why it's worth making the switch. 

On a $500 deposit that's the difference between earning $2.34 with a regular account or $20 with a high-yield account at that 4% rate. And, if you shop around, you may be able to get an even higher rate than that.

Get started with a high-yield savings account now and start earning more interest.

The rates are variable

CD accounts are attractive and, in some cases, may even be preferable to a high-yield savings account. But their rates are locked, meaning that if interest rates rise in the future, savers will get stuck earning that lower rate until the CD has matured. 

But rates on high-yield savings accounts are variable. So if rates rise in the future, your savings, no matter how small they may have been to start, will automatically start earning that higher rate with no input from you. Considering that rates on high-yield savings accounts have risen exponentially from where they were in 2020 and 2021, that's a major selling point, regardless of how much you deposit.

They're accessible

Sure, a higher interest rate sounds good and could make major differences for deposits both small and large. But if your current bank doesn't offer it is still worth the effort to get one? The answer, again, is yes. 

That's because high-yield savings accounts are becoming more accessible and many are offered online (with higher rates than their bank counterparts with physical branch locations). There are even high-yield savings accounts you can open with the same ATM access you're already accustomed to. So you won't give up the flexibility you already have while boosting your earnings at the same time.

The bottom line

A high-yield savings account can be valuable for all deposit amounts, even ones considered to be small. Due to the elevated interest rates currently available with these account types savers can earn many times more interest simply by transferring funds from a regular account to a high-yield one. And by opening one they'll be positioned to earn even more interest should rates rise in the future. Plus, they're accessible both online and via nearby ATMs. When opening one, however, be sure to read the fine print as some may come with a minimum balance required to both open the account and to keep the elevated interest rate.