A new survey from Santander Bank reveals some troubling truths about what Americans are doing with their savings — many are unknowingly putting their cash at risk and leaving free money on the table.
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According to the survey, more than half of Americans (52%) do not realize that a high-yield savings account (HYSA) is a good place to keep emergency savings, as many are unaware of FDIC insurance protection. Even more concerning, only 35% recognize that HYSAs carry less risk than investment accounts.
These misunderstandings are leading to two major financial missteps that could cost consumers hundreds, or even thousands, of dollars over time.
Underutilizing High-Yield Savings Accounts
Despite offering interest rates that can be 10 times the national average, high-yield savings accounts remain underused by many Americans.
“Many consumers believe they need to break up with their primary bank in order to open a high-yield savings account, and they don’t understand how easy it is to move money to and from their high-yield savings account,” said Swati Bhatia, head of retail banking and transformation at Santander Bank.
There’s also confusion about what HYSAs are best used for. While they’re ideal for emergency savings, they’re also a smart option for short-term goals like travel, home repairs or large purchases.
“The safety and security of high-yield savings accounts is underestimated, and may even be confused with riskier accounts, like investments,” Bhatia said.
That confusion can come with a real cost. Many consumers continue to keep their money in traditional savings or checking accounts that offer minimal interest, which means they could be missing out on hundreds or even thousands of dollars in free money.
For example, someone with $10,000 in a HYSA earning a 4.00% APY could generate over $400 in interest after one year. This compares to less than $40 for someone earning the national average of 0.38%.
“Our research shows that 9 in 10 high-yield savings accountholders agree these accounts help them build their savings faster,” Bhatia said. “The interest they earn is meaningful to their finances.”
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Storing Emergency Funds in Risky Investment Accounts
The survey also found that 34% of Americans with brokerage accounts are using them to hold emergency savings — a risky move that could backfire during market downturns.
“While brokerage accounts can be a great way to save for longer-term goals, they aren’t covered by FDIC insurance, so investment risk and market volatility makes them a risky option for keeping funds that may be needed sooner,” Bhatia said. “If you need to access your funds during a time of market volatility, you may have less than what would be expected and be unable to cover an emergency expense.”
This could leave you scrambling to find the funds, or worse, needing to take on debt to cover an unforeseen event.
Why Making the Most of Your Savings Matters Now More Than Ever
In times of economic uncertainty, having a secure emergency fund is more than just smart — it’s essential.
“A high-yield savings account can kickstart an emergency savings fund, which can be the buffer you need to overcome a significant financial emergency,” Bhatia said. “These accounts are safe and grow steadily without being exposed to market risk — which tends to increase during times of economic uncertainty — so you can be sure deposits will be available when you need them.”
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This article originally appeared on GOBankingRates.com: 2 Costly Mistakes Americans Make With Their Savings, According to Santander Bank
