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By Angelica Leicht
Edited By Matt Richardson
/ CBS News
When it comes to managing your finances, maximizing the return on your savings is crucial. Whether you're saving for a rainy day, a future purchase or your retirement, you want to make your money work for you.
And this is a great time to do that, as the Fed's recent rate hikes have resulted in big opportunities for savers. Right now, it's not uncommon to find interest-bearing accounts that offer APYs of 5.5% or more on your money. That's especially true for online accounts, as these banks have less overhead compared to brick-and-mortar banks, and the savings are passed on to customers in the form of higher rates.
Still, it's important to know exactly how much you could earn on your money if it's deposited in one of these accounts. So how much interest can you earn over the course of a year if you deposit $50,000 into one of these accounts — and what are the best account options to consider?
Explore your top savings options here and start earning more interest.
How much interest can you earn on $50,000 in one year?
In general, there are two low-risk account options that are offering top rates on your savings right now: Certificates of deposit (CDs) and high-yield savings accounts. Both are good options to consider, but there are a few differences to note before calculating the potential interest earnings:
Certificates of deposit
CDs are a low-risk investment option offered by banks and credit unions. They offer a fixed interest rate for a specified term, which typically ranges from a few months to several years. With a fixed interest rate, you'll earn the same rate of interest on your money throughout the entire CD term, no matter what happens with the wider rate environment. That can be an attractive option if you're concerned about interest rates dropping in the near future.
The interest rate on a CD also tends to be higher than that of a regular savings account — especially right now. In the current elevated rate environment, the APYs on CDs can be as high as 6% (or, in some cases, even more), and short-term CDs are offering some of the highest rates available today.
However, it's important to note that most CDs require you to leave your funds in the account for the entire term. In this case, you would need to agree to leave your money untouched for 12 months; otherwise, you would likely face early withdrawal penalties, which can eat into your earnings.
Find the top rates you could get on your savings here.
High-yield savings accounts
High-yield savings accounts are another way to earn interest on your savings while keeping your funds easily accessible. Unlike CDs, you can deposit or withdraw money at any time. And, the APYs on high-yield savings accounts can be as high as 5.5% or more, so it's a great time to consider opening this type of account with your $50,000.
However, the interest rates on high-yield savings accounts can vary from one account to the next — and the rates are typically variable. This means that the rates can increase or decrease based on the overall rate environment. That can be a good thing if rates go up — but if rates go down, your high-yield savings account rate will drop, and in turn, you'll earn less interest on your money.
The potential earnings on a $50,000 deposit
Now, let's take a look at how much interest you can earn on $50,000 in one year with different interest rates:
- 4.25% APY: If you invest your $50,000 in a CD or high-yield savings account with a 4.25% interest rate, you will earn $2,125 in interest in one year.
- 4.5% APY: A 4.5% CD or high-yield savings account will yield $2,250 in interest on your $50,000 investment in one year.
- 4.75% APY: Opting for a 4.75% CD or high-yield savings account will earn you $2,375 in interest over the course of a year.
- 5% APY: With a 5% CD or high-yield savings account, your $50,000 will accumulate $2,500 in interest in one year.
- 5.25% APY: A 5.25% CD or high-yield savings account will bring you $2,625 in interest within a year.
- 5.5% APY: Choosing a 5.5% CD or high-yield savings account will result in $2,750 in interest on your $50,000 investment annually.
- 5.75% APY: A 5.75% CD or high-yield savings account will earn you $2,875 in interest in one year.
- 6% APY: The highest rate on our list, a 6% CD or high-yield savings account, will accumulate $3,000 in interest over one year.
The bottom line
Earning interest on your savings is a smart way to make your money work for you, and the amount you can earn varies depending on the interest rate, deposit amount and the savings vehicle you choose. CDs offer a fixed interest rate for a set term, while high-yield savings accounts provide more flexibility. The interest you can earn on $50,000 in one year can range from $2,125 to $3,000 depending on the interest rate.
Ultimately, your choice between CDs and high-yield savings accounts should align with your financial goals and your need for liquidity. But, regardless of your choice, both options provide a safe and reliable way to earn interest on your savings.
Angelica Leicht
Angelica Leicht is senior editor for CBS' Moneywatch: Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
