Q. What's the point of putting my money into a high-yield savings account that pays 4.2% if I'm going to be taxed on all the interest I earn? That makes my tax refund smaller. Isn't my savings working against me instead of for me?

A.Your savings account is still working for you even if you have to fork over 25% or more of the interest to the IRS.

At 4.2%, you're earning $42 a year on every $1,000 you have in your account. If you're in the 25% tax bracket and the IRS takes $10.50 of that, you're still earning $31.50 per $1,000 per year.

That $10.50 may reduce your tax refund. But remember, the only reason you're getting a refund is because your employer is withholding too much from your paycheck.

The government isn't being generous when it cuts that check. It's simply returning what is rightfully yours.

Everyone needs a savings account of some type because it's the best place to keep relatively small amounts of money that you might need right away.

The 4.2% you're earning is very good for that type of account but it's no way to get rich.

The best way to build an enviable nest egg is using tax-deferred retirement accounts like an IRA or 401(k). That's where most of us should be putting the great majority of our savings. You can check out their tax advantages by reading 7 simple rules for a successful 401(k) account or at 6 simple rules for a successful IRA.

You'll earn much better returns and lose less to taxes -- now and in the future.