Your savings account isn’t going to get its learner’s permit this year, but if it’s turning 16, it should have earned something to celebrate. Maybe it did. Maybe it didn’t.
MoneyLion ran the numbers on this scenario: what if you’d opened a high-yield savings account with $500, $1,000, $5,000 or $10,000, then withdrew $500 every single year for sixteen straight years?
The verdict? For most of those accounts, the story doesn’t end well. Here’s what actually happened.
The Math
According to Achim von Bodman, a senior tax manager at Watter CPA, using the average high-yield savings rate over these 16 years (roughly 1.7%), here’s where those accounts would stand:
“The high-yield savings account with $500 in it will be gone after one year. The high-yield savings account with $1,000 in it will last two years,” Bodman pointed out.
The $5,000 account would stretch longer but still empty after about 11 years. Only the $10,000 account survives all 16 years — barely.
“It will end with about $3,600 in it,” Bodman explained. “You took out $8,000. You have about $3,600 left so the high-yield savings account only earned about $1,600 in interest on your original $10,000 over 16 years.”
Interest Rates Tanked Your Returns
For most of this 16-year window, high-yield savings accounts were practically useless for earning money.
“The interest rates were near zero from 2010 to 2015 and again in 2020 and 2021,” said Bodman, noting that they only started to go up toward 4%after 2022. “So, a high-yield savings account with $10,000 in it earning 1% interest would only earn $100 in interest per year while you were taking out $500.”
Put another way: you weren’t drawing from the interest. You were draining the principal. At that rate, your withdrawals were always going to outpace your earnings.
The Bottom Line
This scenario isn’t a knock against high-yield savings accounts themselves.
As Bodman explained, “A high-yield savings account is meant to keep your money safe and easy to access, not to help it grow or to provide an income.” It’s a parking spot for cash you might need, not an investment vehicle.
“If you need an account that will earn interest and last, a high-yield savings account is not the choice especially during years when the interest rate is near zero.”
The real lesson? If you’re systematically pulling money out of a low-interest account, the math works against you — fast. The solution isn’t to find a better savings account; it’s to rethink your withdrawal strategy.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion:
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
