High-yield savings account for short-term goals: Saving for a vacation or wedding

Getting ready for that big two-week trip to Europe? Trying to figure out how much you'll need to save for your dream wedding next summer? With travel costs rising and weddings in the United States nearing $30,000 on average, it’s more important than ever to be intentional and strategic with your savings. This is where a high-yield savings account comes in.

High-yield savings accounts can boast interest rates as much as 15 times higher than traditional savings accounts, meaning your money will grow faster and get you closer to your goals. When combined with smart budgeting and disciplined spending, these accounts can be the key to making those short-term financial milestones a reality. Read on to learn how these accounts work and how to choose the best one for your needs.

What you'll learn

What is a high-yield savings account?

Saving for a vacation with a high-yield savings account

Saving for a wedding with a high-yield savings account

Choosing the right high-yield savings account for your short-term goal

What is a high-yield savings account?

A high-yield savings account is a type of savings account offered by credit unions, banks and online financial institutions. These accounts offer very competitive interest rates that far outpace traditional savings accounts. The term "high yield" refers to the annual percentage yield (APY), which is the amount of interest your money will earn in one year.

Benefits of high-yield savings accounts

Aside from high interest rates, high-yield savings accounts come with several benefits that make them an attractive option for savers.

• Easy access to funds: Unlike certificates, which lock in your funds for a set period, high-yield savings accounts offer liquidity. This means you can withdraw your money whenever you need to.
• FDIC/NCUA insurance: Most high-yield savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA), which protects your money up to $250,000 per depositor, per institution. This assurance gives you peace of mind your funds are safe and secure.
• Low or no fees: Many high-yield savings accounts come with low or no monthly maintenance fees or minimum balance requirements, making them a cost-effective option for savers.

Saving for a vacation with a high-yield savings account

When planning a vacation, the first step is to identify the total cost of your trip. Start by listing all possible expenses like transportation, accommodation, meals, activities and souvenirs. Do some research to gather price estimates for each category to form a detailed budget in no time.

Once you have the total estimated cost, create a savings timeline by figuring out how many months you have until your vacation. Divide the total cost by the number of months to set a monthly savings target. This way, you’ll have a clear and manageable goal to work towards, making it easier to stay on track.

After you’ve established a monthly savings target, it's time to start setting aside money each month. Here's where a high-yield savings account can come in handy.

High interest rates are compounded on a regular basis. That means the earlier you start saving, the more interest your money will earn. To streamline the savings process, consider setting up automatic transfers from your checking account to your high-yield savings account. Most credit unions and banks will allow you to schedule regular transfers, ensuring a portion of your income is consistently saved without requiring manual effort. This method can be especially helpful if you struggle with self-discipline or find it challenging to stick to a savings plan.

When it comes time to book your vacation, you’ll have a healthy sum of money saved up in your high-yield savings account, and the interest earned will be an added bonus. So, instead of relying on credit cards or loans for your trip expenses, consider using the savings from your high-yield savings account to cover the costs.

Saving for a wedding with a high-yield savings account

Similar to planning a vacation, you’ll want to clearly outline all anticipated expenses for your wedding, such as the venue, catering, attire, photography, entertainment, and decorations. Start by obtaining quotes for each category to get an accurate picture of your total costs. If the budget becomes unmanageable or exceeds your projected savings, consider prioritizing essential elements of the wedding and looking for ways to reduce costs.

This might include choosing a less expensive venue, DIY decorations, or opting for more affordable catering options. Alternatively, you could extend your engagement period to allow for more time to save.

Also, consider opening up a dedicated supplemental high-yield savings account that is completely separate from your primary savings account. This will allow you to have a clear view of your wedding savings progress and avoid accidentally spending the funds on other expenses.

You could also set up a split direct deposit if your job allows this. A small portion of your paycheck could go into the supplemental high-yield savings account you are using for your wedding and the rest into your primary savings. This way, you can easily add money to the account each paycheck.

With a little bit of budgeting and creativity, you’ll be on your way to saving up for your dream wedding without breaking the bank.

Choosing the right high-yield savings account for your short-term goal

Whether you're saving for a wedding, vacation or any other short-term goal, there are a few primary factors you should consider when selecting the right high-yield savings account.

• Compare interest rates: Not all high-yield savings accounts are created equal, and neither are their interest rates. Research different options and compare their APYs to find the highest possible return on your savings. Find out whether the advertised rate is a one-time promotional rate or ongoing.
• Check for fees: Ensure the high-yield savings account has minimal or no fees, including monthly maintenance fees and withdrawal fees. Fees can quickly erode your savings, so take the time to read the fine print before opening an account.
• Consider accessibility and features: Choose a high-yield savings account that offers convenient access to your funds through online banking, mobile apps and ATM access. 
• Verify NCUA or FDIC insurance: Ensure the high-yield savings account is insured by the NCUA or FDIC, protecting your deposits up to $250,000 per depositor, per financial institution. This guarantees that your money is safe even if the bank fails.
• Understand minimum balance requirements: Some high-yield savings accounts require a minimum balance to earn the advertised APY or to avoid fees. Make sure you can meet these requirements without straining your finances.
• Look at other accounts and products: While you can have accounts and products across numerous financial institutions, being able to do all or most of your banking at one place can certainly make your life easier. When considering a savings account, it’s worth checking out other accounts and products that financial institutions offer. Ideally, there will be a full range of products, with everything from savings and checking to credit cards, auto loans, mortgages and more.

If you're ready to save, Alliant offers several convenient ways to open a high-yield savings account. If you're already an Alliant member, log in to online banking and select Open a New Account in the left sidebar and follow the prompts. If you're not yet a member, review our savings account or supplemental savings pages for steps on how to apply.