11 Ways to Use a High-Yield Savings Account

1. Create an Emergency Fund

An emergency fund is money put aside for big unexpected expenses or financial crises such as job loss. Experts typically advise building an emergency fund equal to three to six months of your essential living expenses, to be tapped only in a crisis. Keeping your emergency fund in a high-yield savings account reduces temptation to use it for other things. Streamline emergency savings with an automatic transfer depositing part of each paycheck into your emergency fund.

2. Save for a Down Payment on a Home

Conventional mortgages usually require a down payment of 20% of a home's purchase price, but some mortgage loans require a down payment of 3.5% or less. Calculate how much money you can spend on home expenses each month, including a mortgage, insurance, home maintenance and other costs, to get a realistic down payment figure. Revise your budget to save for a down payment and use a high-yield savings account to help your cash grow faster. Consider taking a second job or side gig to accelerate your savings.

3. Save for a Vacation

Use a high-yield savings account to save for your vacation and enjoy your trip without worrying about the credit card bill when you return. Estimate the cost of your dream vacation, including transportation, lodging, activities and food. Divide the total by the number of months until your trip. Put aside that amount per month, and you'll hit your goal before you know it.

4. Save for a Wedding

With venue, catering, photography, flowers and more, it's no wonder the average wedding costs $30,000, according to The Knot. Most weddings are planned well in advance, giving you time to save for your own or your child's wedding using a high-yield savings account. Create a budget for your wedding and divide the total by the number of months until the big day. Stash that much in your high-yield savings account each month, and watch the money add up.

5. Save for a New Car

If you're planning to finance a car, aim to make a down payment of at least 20% of the purchase price. Putting down this amount can help you qualify for a more favorable auto loan and buffer you against depreciation. Research prices for your desired make and model, using a car payment calculator to estimate how much you can afford. Calculate 20% of the total price, divide that amount by the number of months until you want to buy your new vehicle and put that much in your savings account each month. Depending on your timeline, you might even be able to save enough to buy a used car outright.

6. Save for Starting a Family

The one-time expenses of having a baby or adopting a child are substantial. Adoption can cost a few thousand dollars to $45,000 or more; medical costs for childbirth can run tens of thousands of dollars as well. Don't forget baby gear, furniture and maternity clothes. You may also need savings to cover any unpaid parental leave. Approximate these costs by making a new budget to account for your new baby; then commit to putting aside a chunk of money each month in your high-yield savings account.

7. Save for Renting an Apartment

Moving out of your parents' home or into a bigger apartment? You may need a security deposit and first and last month's rent. Other moving costs include rental application fees, movers, storage, cleaning fees, pet boarding, new furniture and utility deposits. Stashing cash in a high-yield savings account before you start your apartment search can ensure you're financially ready to pounce when you find the perfect place.

8. Save for Home Improvement Projects

Although you can finance home improvement projects with a home equity loan, a home equity line of credit (HELOC) or a personal loan, paying for a home renovation in cash could reduce overall costs by eliminating interest and loan fees. Use websites like HomeAdvisor or Angi to get estimated project costs, building in an extra 15% or 20% for cost overruns. Depending on your project's price tag, a high-yield savings account could save you substantially compared to the costs of borrowing.

9. Save for Annual or Seasonal Expenses

Monthly bills are easy to account for, but recurring annual or seasonal expenses such as insurance premiums, car registration, membership subscriptions, seasonal home maintenance or quarterly estimated tax payments have a way of sneaking up to sabotage your budget. Add up all these expenses over one year and divide the total by 12. Put that amount aside each month and you won't panic when the property tax bill arrives.

10. Save for Major Purchases

Eyeing a new appliance, sofa, computer, TV or other big purchase? Consider using a high-yield savings account to start a sinking fund and save up for it. Enjoy the best of both worlds by making your purchase with a credit card to earn rewards or benefit from purchase protection. Then use your savings to pay the bill in full when it arrives—and avoid incurring any interest.

11. Save for Holiday Gifts and Expenses

Don't go into debt for your holiday fun and gifts—start a high-yield savings account to pay for them. Using the prior year's expenses as a guide, estimate the cost of gifts, food, décor and social events this holiday season, and divide that amount by 12. Start your holiday savings fund January 1 and you could have quite a chunk of change by the time Thanksgiving rolls around.

How to Compare High-Yield Savings Accounts

To choose the best high-yield savings account, compare options from banks, online banks and credit unions. Typically, the highest APYs are available from online banks, but interest rates aren't all that matter. Consider these factors too:

• Minimum initial deposit requirements: There may be a minimum initial deposit of $25, $100 or more to open a high-yield savings account.
• Minimum balance requirements: A maintenance fee may kick in if you fail to maintain a certain average minimum balance in your account.
• Fees: Some high-yield savings accounts charge maintenance fees of up to $25, which you may be able to waive by maintaining a certain balance in your account.
• ATM access: You shouldn't need to get cash out of a savings account often, but if you plan to make cash deposits, make sure the bank offers convenient, fee-free ATMs. Online banks often have approved ATM networks you can use or will reimburse ATM fees.
• Limits on withdrawals: Some high-yield savings accounts restrict you to a certain number of transactions per month, after which you're charged a fee.
• Ease of transfers: If your checking account is at one bank and your high-yield savings account is at another, how long will it take to transfer money between accounts? To ensure fast access to emergency savings, make sure you can get your money quickly.
• Online/mobile experience: Find out what features the bank's website and mobile app offer to help you manage your account.
• Security: Look for a bank insured by the FDIC or a credit union insured by the National Credit Union Administration (NCUA). Money held at federally insured banks and credit unions is protected up to at least $250,000 per individual account holder, per account type, per financial institution, even if the bank fails.

The Bottom Line

If you can't save as much as you hoped to for your down payment, home renovations or other financial goal, a loan or credit card could offer a way to cover the rest of your costs. Working to improve your credit while you sock away savings may help you qualify for better interest rates on loans and credit cards, which can mean lower payments. Start by checking your credit report and credit score to see where you stand. If your score needs a boost, paying down debt, reducing credit utilization and paying your bills on time can help improve it. Building your savings and your credit at the same time can be challenging, but the results are worth the effort.