High-yield savings accounts (HYSAs) have become a go-to option for people looking to grow their cash without taking on risk. With interest rates much higher than traditional savings accounts, they offer a great way to earn passive income while keeping money safe and accessible.
But despite their benefits, many people make a critical mistake when using these accounts — one that could cost them thousands of dollars in the long run.
Don’t treat your HYSA like a long-term investment
While HYSAs are great for growing your money safely, they are not designed for long-term investing.
Many people make the mistake of depositing large sums of money into these accounts and leaving it there for years, thinking they’re making a smart financial move. But in reality, this strategy could be costing you money.
Our Picks for the Best High-Yield Savings Accounts of 2025
American Express® High Yield Savings Member FDIC. APY 3.70%
Rate info
Member FDIC.
| 3.70%
Rate info
| $0 | |
 SoFi Checking and Savings Member FDIC. APY up to 3.80%²
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Member FDIC.
| up to 3.80%²
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| $0 | |
 Capital One 360 Performance Savings Member FDIC. APY 3.70%
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Member FDIC.
| 3.70%
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| $0 |
Here’s why:
- You’re missing out on higher returns: While HYSAs are safe, they can’t compete with long-term investments like index funds or stocks. Historically, the stock market has averaged annual returns of around 10%, significantly outpacing high-yield savings accounts.
- Inflation will outpace your savings: Even if your HYSA earns 4.00% APY, inflation typically rises at an average rate of around 2% to 3% per year. That means your real purchasing power is only growing by a small margin, if at all. Over time, inflation can erode the value of your money.
- Interest rates fluctuate: Unlike fixed-rate investments, HYSA rates can go up or down depending on the Federal Reserve’s moves. If rates drop, your earnings could shrink without notice.
The right way to use a high-yield savings account
High-yield savings accounts are great — they’re just not meant for long-term wealth building. Here’s how to use them the right way:
- Emergency fund savings: Keep three to six months’ worth of essential expenses in an HYSA. This ensures your emergency fund is accessible while earning some interest.
- Short-term savings goals: If you’re saving for a vacation, wedding, home renovation, or another expense within the next couple of years, an HYSA is a great place to park your cash.
- A holding spot for investments: If you’re planning to invest but waiting for the right opportunity, an HYSA can temporarily store your money while earning interest.
Where to put extra cash instead
If you have a large amount of money sitting in an HYSA beyond what you need for emergencies or short-term goals, here are better alternatives:
- Index funds: If your goal is long-term growth, consider investing in a diversified stock market fund. Over decades, these investments historically outperform savings accounts.
- Certificates of deposit (CDs): If you don’t need immediate access to your money, short-term CDs (6- to 12-month terms) may offer even higher interest rates than HYSAs.
- Money market accounts: These accounts function similarly to HYSAs but may offer check-writing privileges and higher interest rates in some cases.
- Treasury bills or I bonds: For a low-risk investment with better protection against inflation, U.S. government bonds can be a solid choice.
Make your money work for you
High-yield savings accounts are an excellent tool — but only if you use them correctly. They’re perfect for emergency savings and short-term goals, but shouldn’t be treated as an investment vehicle. If you’re keeping large amounts of cash in an HYSA long term, you’re likely missing out on better opportunities for growth.
