Are High-Yield Savings Accounts Safe?

Why High-Yield Savings Accounts Have Almost No Risk

There's little risk of losing money with an insured high-yield savings account because your cash isn't invested. That sets it apart from a brokerage account, 401(k) and other investment accounts, which are all tied to the stock market. When investing, both gains and losses are possible.

What's more, most high-yield savings accounts provided by banks are insured by the Federal Deposit Insurance Corp. (FDIC). If your bank fails, which is unlikely, you'll be covered up to $250,000 per depositor, per ownership category. The National Credit Union Administration (NCUA) offers comparable protection for credit union members.

Can You Lose Money in a High-Yield Savings Account?

No, you can't lose money in a high-yield savings account if you stay within federal insurance limits. A high-yield savings account is considered a safe place to keep your emergency fund. You can also use it to save for short-term financial goals, whether that's a down payment on a home or an upcoming vacation. But that doesn't mean there's zero financial risk.

Interest Rates Can Change

It's true that high-yield savings accounts offer competitive annual percentage yields (APYs). As of June 2025, some have rates as high as 5.00%. Meanwhile, the average rate on a traditional savings account is only 0.42%, according to the FDIC. But it's important to note that APYs on high-yield savings accounts are variable. That means your interest rate can move up and down over time, so the yield you'll get on your money can change.

The APY, which is how much your account will earn over the course of a year, can also vary from one financial institution to the next. But APYs are closely linked to the federal funds rate, a benchmark rate set by the Federal Reserve. When this rate goes up, APYs usually do the same—and vice versa. If your rate drops, your account won't earn as much interest as it did before.

Investment Returns Are Usually Higher

Investing carries more risk than keeping your money in an insured savings account, but there's also the potential for stronger gains. Case in point: The stock market has had average annualized returns of about 10% over the past century. If you're saving for a long-term goal, such as retirement, an investment account will likely net the best returns. That's because time is on your side, giving your portfolio the opportunity to recover from periodic market downturns.

Rising consumer prices are another important thing to think about. The interest you'll earn in a savings account will likely lag behind the annual rate of inflation. As a result, your cash savings will gradually lose value over time. Using an investment account to grow your nest egg can help you keep up with inflation.

Learn more: Which Low-Risk Investments Are Best for Inflation?

How to Choose a Safe High-Yield Savings Account

You'll want to do a little research and compare financial institutions before choosing a high-yield savings account. Below are some important factors to consider:

• Safety: Only go with a bank or credit union that's insured by the FDIC or NCUA.
• APYs: Shop around and compare rates from multiple high-yield savings accounts. You may find that online banks tend to offer the highest rates.
• Rate of compounding interest: A savings account allows your interest to earn interest—a perk known as compounding. You stand to earn the most when interest compounds more frequently.
• Fees: Some banks charge monthly maintenance fees, minimum balance fees, overdraft fees and more. Bank fees could eat into your savings.
• Access: Most high-yield savings accounts limit you to six free electronic transfers and withdrawals per month. You'll also want to confirm your ATM access before opening an account.
• Reputation: Look up the account provider's customer reviews and Better Business Bureau rating. If you come across complaints, you may want to choose a bank or credit union that has a better track record for customer service.

Learn more: Best High-Yield Savings Accounts

The Bottom Line

The main draw of a high-yield savings account is that you can expect an above-average interest rate. That allows your money to grow at a faster clip, and you'll have easy access to your funds. An added bonus is that there are no real risks of high-yield savings accounts when you save with an insured bank or credit union. As long as you stay within insured limits, you're not in danger of losing money because it isn't an investment account.

But when it comes to long-term financial goals, a high-yield savings account probably won't produce the returns you could get with higher-risk investments like stocks. The goal is to strike a balance between low- and high-risk investments. The right asset allocation for you will depend on your age, financial goals and risk tolerance.