High-yield savings accounts build wealth through compound interest. Let's say you put $10,000 in a savings account that earns compound interest at 1 percent per year. Assuming interest compounds on a monthly basis, in one year you'll have made $100.46. In five years, you'll have made $512.49.
When it comes to maximizing growth, compound interest is favorable to simple interest. Simple interest just accumulates interest on the principal sum. So if you have $10,000 earning an APY of 1 percent, one year later you'll have made $100, and five years later you'll have made $500. Compound interest, on the other hand, reinvests the interest you've collected, so that you're essentially building interest on interest. That's where the extra 46 cents and $12.49 come from in the previous example. By the fourth year you're not just earning 1 percent on $10,000, you are earning 1 percent on about $10,400.
The more often your interest compounds, the better. Daily is better than monthly, although the difference is not significant until you're working with hundreds of thousands of dollars.
Many high-yield savings accounts have minimum balance requirements and penalize you with fees or lower APYs if you don't maintain that level of investment. Most only allow you to withdraw or transfer money six times per month without paying a penalty, in accordance with a Federal Reserve Board rule known as Regulation D, so your money isn't as accessible as it would be in, say, a checking account.
Certificates of deposit are even less accessible. Compared with savings accounts they offer higher APYs, but only under the condition that you can't touch the money for an established number of months without paying a penalty. Some checking accounts offer higher APYs too, but they make you jump over a few hurdles, such as spending requirements, to earn them.