A high-yield savings account earning 4-5% APY is a solid place to park money. But if you've got cash sitting there that you won't touch for a year or more, you're probably leaving returns on the table. Here's what actually pays more—and when each option makes sense.
When a HYSA Falls Short
HYSAs are genuinely excellent for two things: emergency funds and money you'll need within 12 months. They're liquid, FDIC-insured, and easy to access. For those purposes, they're hard to beat.
The problem is when people use them as a catch-all savings vehicle for money they don't actually plan to spend soon. If you've got $20,000 sitting in a HYSA and you won't need it for two or three years, that rate of 4-5% starts looking less impressive compared to what's available elsewhere. The alternatives below all carry different tradeoffs—but most offer meaningfully better returns for money you can afford to lock up.
Treasury Bills and I Bonds
T-bills are short-term US government debt, and right now they're yielding 4.5-5.3%—often beating the best HYSA rates while being backed directly by the federal government. You can buy them through TreasuryDirect.gov or most brokerage accounts with no fees.
The key detail: T-bills mature in 4 to 52 weeks. When one matures, you can roll it into a new one. This gives you the safety and yield of government debt without locking up your money for years.
I Bonds are different. They're inflation-adjusted, currently yielding around 3.5%, and you can't touch the money for at least one year. If you cash out before five years, you forfeit three months of interest. They're best for money you definitely won't need for a while and want protected against inflation over the long run.
Quick Comparison: T-Bills vs HYSAs
T-bills often yield as much or more than the best HYSAs, with the added security of direct US government backing. The main difference is that T-bill interest is exempt from state and local taxes—which matters if you're in a high-tax state.
Certificates of Deposit (CDs)
CDs let you lock in a rate for a fixed term—anywhere from 6 months to 5 years. In return, banks typically pay 0.25-0.75% more than their HYSA rates for equivalent time horizons. That gap matters when compounded over a couple of years.
The catch is the early withdrawal penalty. Pull money out before the term ends and you'll usually forfeit a few months' worth of interest. That's fine if you're disciplined about not touching the money—but it means CDs work best when you have a clear timeline for when you'll need the cash.
One approach worth exploring: CD laddering. Instead of one big CD, you split your money across multiple CDs with staggered maturity dates. Some money stays accessible while the rest earns higher long-term rates.
Index Funds and ETFs
For money you genuinely won't need for five or more years, this is where the real upside lives. The S&P 500 has averaged roughly 10% annually over long periods. That's not a guarantee—some years are down sharply—but over a decade or longer, equity index funds have consistently outpaced savings accounts by a wide margin.
The tradeoff is risk and volatility. Your balance can drop 20-30% in a bad year. If that would cause you to sell or cause financial stress, index funds aren't the right vehicle for that money. But for a true long-term horizon, the compounding difference between 5% and 10% is enormous.
See our full breakdown: Index Funds vs ETFs—what the differences actually are and which makes sense for your situation.
Money Market Funds
Money market funds are offered through brokerages (not to be confused with money market accounts at banks). They invest in short-term, high-quality debt instruments and often yield slightly more than HYSAs. Some currently sit at 4.8-5.1%.
They're not FDIC-insured, but they're considered extremely safe—the risk of losing principal is very low. If you already have a brokerage account, keeping cash in a money market fund rather than a bank savings account is worth comparing. Settlement is typically next-day, so they're nearly as liquid as a HYSA.
The Right Mix for Your Situation
There's no single best answer—it depends on when you'll need the money and how much risk you're comfortable with. A reasonable framework:
- Emergency fund (3-6 months of expenses): Keep this in a HYSA. Liquidity matters more than yield here.
- Goals 1-3 years out (house down payment, car, etc.): CDs or T-bills. Lock in a known rate without stock market risk.
- Goals 5+ years out (retirement, long-term wealth building): Index funds or ETFs. Accept short-term volatility for long-term compounding.
- Cash in a brokerage account: Consider a money market fund over letting it sit idle.
Most people don't need to choose just one. The goal is to make sure each dollar is in the right vehicle for its purpose—not just defaulting to one account because it's convenient.