Here's How Much Interest You Can Earn on $8,000 in Savings
KEY POINTS
- If you put your $8,000 in a savings account that pays an APY of 5.00%, you could earn $400 a year in interest.
- Savings account rates are falling, but there are still some competitive options available.
- Once you have enough money in savings, consider investments that could pay higher returns.
Having $8,000 in savings is a solid achievement. It puts you ahead of many Americans who couldn't cover a $1,000 emergency. Not only that, but your savings will also work for you by earning interest.
Depending on what top high-yield savings account you use, $8,000 in savings could generate over $400 a year in interest payments. The exact amount depends on what annual percentage yield (APY) your account pays.
Savings accounts are still paying high returns
You might have seen headlines about falling savings rates recently. Don't let them put you off from opening a high-yield savings account. It's true, the Fed's rate cuts have had an impact on savings APYs. However, rate cutting is a gradual business and you can still earn solid yields from your savings today.
More important than the rate cuts is the knowledge that not all savings accounts are created equal. The average savings APY is 0.42%, according to the FDIC. If you've got money in a savings account that's paying less than 1%, you are missing out on potential interest payments.
Our Picks for the Best High-Yield Savings Accounts of 2024
| Product | APY | Min. to Earn | |
American Express® High Yield Savings
Member FDIC.
APY
3.80%
Rate info
3.80% annual percentage yield as of December 28, 2024. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.80%
Rate info
3.80% annual percentage yield as of December 28, 2024. Terms apply.
|
$0
|
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
Capital One 360 Performance Savings
Member FDIC.
APY
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
|
$0
|
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
Western Alliance Bank High-Yield Savings Premier
Member FDIC.
APY
4.46%
Rate info
The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
Min. to earn
$500 to open, $0.01 for max APY
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
4.46%
Rate info
The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
|
$500 to open, $0.01 for max APY
|
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
Learn more about which high-yield savings accounts will pay over 4.00% APY -- nearly nine times more than the national average.
Here's the difference a high-yield savings account can make:
| APY | Annual Interest Earned on $8,000 |
|---|---|
| 0.46% | $36.80 |
| 1.00% | $80 |
| 2.00% | $160 |
| 3.00% | $240 |
| 4.00% | $320 |
| 5.00% | $400 |
When you're comparing savings accounts, it is easy to look only at APYs. After all, you can earn hundreds of extra dollars by switching to a high-paying account. However, minimum deposit requirements and monthly fees matter as well. It's also good to factor in how you want to bank -- an online-only bank may not have all the features you need. For example, they lack in-person customer service.
Know how much you need in savings
When you think about how much interest you can earn on your savings, it's natural to wonder whether you might earn even more by parking your money elsewhere. For example, by investing it in the stock market or locking it away in a CD.
But you need to have some money in savings before you invest or open a CD. It's like unlocking levels on a computer game.
The common wisdom is to keep three to six months' worth of expenses in a savings account. Sure, CD rates are often higher and they are fixed (unlike savings APYs). But your savings are your cushion against the unexpected and you need them to be accessible -- and a CD is not. You might earn slightly less interest in a savings account, but you'll have peace of mind.
To know how much to keep in savings, look at your monthly expenses and think about how you might cope if you lost your job or faced a medical emergency. Do you have more than one source of income? And how many people rely on you financially? These questions can help you decide how many months' expenses to sock away.
Once you've hit your target, consider how any extra cash might work best for you. That might mean putting it toward other savings goals, such as a down payment for a house or car. You might also decide to invest your money by buying assets that you hope will perform well in the long term.
Right now, the very best savings APYs are just over 5%, but that won't last forever. In contrast, the S&P 500 has historically generated average annual returns of almost 8% or more. To put that into real money, let's say you invested $8,000 and left it alone for 30 years. An investment earning 8% a year would earn about $46,000 more than one that earned 5%.
| Return | 5% | 8% |
|---|---|---|
| Portfolio value (approximate) | $34,500 | $80,500 |
Investing carries more risk than savings accounts. There will be good and bad years, and there are no guarantees. But having a solid savings cushion makes it easier to leave your investments alone. If you invest money you don't need for five to 10 years or more, you'll be able to wait out any bad years and allow compound interest to work in your favor.
Bottom line
Your savings are crucial because they give you financial stability. Keep them in a high-yield savings account to maximize your interest earnings. And once you've saved enough, consider investing to build wealth for the future.
Our Research Expert
Emma owns the English-language newspaper The Bogota Post. She began her editorial career at a financial website in the U.K. over 20 years ago and has been contributing to Motley Fool Money since 2019.
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