It isn't easy finding a good home for small amounts of money. If you use direct deposit for a paycheck, you may be able to make a second deposit into a savings account or separate checking account. Initially, you're not worried about what the money is earning, you're concerned about getting in the habit of putting this money aside. Look for a low-cost money market checking or savings account. As the savings start to build, you'll be able to buy CDs, or even U.S. Treasury Bills or Notes.
CDs also have minimum denominations, but that minimum varies depending on the bank.
Bankrate can show you CD rates in your market and the minimum deposit required by each bank. APY Dr. Don, I am curious. If interest is paid daily, then today's interest payment starts earning interest tomorrow. The more frequent the payments, the higher the APY for the same nominal or stated interest rate. The table below shows how the APY changes for a 5-percent nominal interest rate as the frequency of interest payments is increased.