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Here's who should and shouldn't put money into a high-yield savings account, according to an expert

If you have extra cash, you may consider putting it into a high-yield savings account. CNBC Select asked an expert his advice on choosing the right kind of savings.

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Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.

While there's currently a lot of economic uncertainty, many are thinking about how to best save for the future while also paying for immediate expenses. If you have any extra cash after covering your basic necessities and bills, you may want to consider putting it into a high-yield savings account. With a high-yield savings account, you can earn more interest while still having access to your cash when you need it.

Below, CNBC Select spoke to Shon Anderson, a certified financial planner and president at Anderson Financial Strategies, about what to consider before opening a high-yield savings account.

First ask yourself: When will you need to use this cash?

Anyone deciding on what kind of savings account to use should first consider how soon they plan on dipping into the funds.

"It really all comes back to what they expect to use the money for in the future," Anderson tells CNBC Select. "In other words, what is their timeline for needing to use this extra cash?"

In times like these, when you may be concerned about a recession in the near future, financial experts typically recommend prioritizing an emergency savings fund that you can access easily if the need arises. 

"An emergency fund, since used for emergencies we can't predict, should be treated as if the person might need that cash tomorrow," Anderson says. "I think a high-yield savings account is a perfect way for someone to maintain their emergency fund."

With other savings account options, such as certificates of deposit (or CDs), your money may earn a higher APY the longer you keep it in your account, but you are typically charged a penalty fee for withdrawing too soon.

But according to federal law, high-yield savings accounts allow you to withdraw or transfer your cash out of your account up to six times per month without paying any fees. (Note that this rule has been temporarily lifted in response to the coronavirus outbreak, and customers can "make an unlimited number of convenient transfers and withdrawals from their savings deposits," according to a statement by the Federal Reserve Board.)

Money market accounts (or MMAs) have the same six-withdrawal limit and act similarly to high-yield savings accounts, but they often come with higher minimum balance requirements.

Here's who should put money into a high-yield savings account

Right now is a really good time to prioritize saving for an emergency, especially if you still have a pay check coming in. Using a high-yield savings account to stash your money now could help you for the future.

CNBC Select has ranked the five best high-yield savings accounts, and all of them offer an annual percentage yield (APY), or rate of return, that is at least 10 times more than the 0.04% national average APY on traditional savings accounts, according to the Federal Deposit Insurance Corporation (FDIC).

For instance, customers of the Vio Bank High Yield Online Savings Account offers a 0.75% APY and a $100 minimum deposit to open an account.

Anderson also recommends a high-yield savings account over a traditional savings account for those who need to start using their emergency fund soon, or anyone worried that they have won't be enough. "Maybe they have three months of living expenses but after this pandemic, would feel more comfortable with nine months," he says.

Here's who shouldn't put money into a high-yield savings account

If you are someone who currently has a stable income with an adequate emergency fund to cover at least three to six months' worth of expenses, you may want to consider putting your extra cash somewhere better suited to grow for the long-term (more than five years).

"I would definitely advocate considering investing it in the market to target higher long-term returns over the high-yield savings account," Anderson says. "The market is still trailing roughly 17% from where it was prior to the pandemic, and now is a great time to be buying into the market at a low point."

However, the stock market does pose inherent risk. Even though investing your money consistently over time (a strategy called dollar-cost averaging) can help you build wealth in the future, an investment fund should not replace an emergency fund.

Bottom line

If you have any extra cash right now that you would like to use to build up an emergency fund, a high-yield savings account offers a chance to earn compound interest while still giving you easy access to your cash. Your money will also be protected and federally insured up to $250,000 in a high-yield savings account.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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