Experts recommend we save at least 10% of our income each month. What should we do with that money? After all, we’ve worked hard for our money and we want to get the best return possible. There are a lot of options today, so how do you decide which savings account is the best fit for you and your saving goals? Read on as we take a look at how to find the best savings account.
What Is a Savings Account?
Savings accounts are a good way to safely park your money, as they’re federally insured. That means you are covered to at least $250,000 per insured bank. If the bank with which you have your savings account collapses, you can claim your money back up to a total of $250,000.
A savings account is where you should hold your money if you expect to need it in the near future or when you don’t want to risk losing any of the cash. Unlike most checking accounts, savings accounts pay you interest on your money. Aside from traditional accounts, other types of savings accounts include certificates of deposit and money-market accounts.
Now that you know the savings account definition, lets get into the good stuff.
Who Needs a Savings Account?
Having an emergency fund should be a key part of your financial plan. An emergency fund is savings you set aside for unforeseen events. The COVID-19 pandemic is one example of how events in life can dramatically alter your income. Having an emergency fund in a savings account gives you a buffer when emergencies happen, and emergencies do happen.
Although savings account interest rates are low at the moment, a savings account is still worth having. Putting cash into a savings account stops you from spending it on unnecessary purchases and helps you to budget more prudently. They’re simple to use and keep your money protected even if the bank itself fails.
How to Find the Best Savings Account For You
With so many savings accounts available, you may be asking yourself “What savings account is best for me?” Before you open an account, you have to know what is the best savings account to have. Here are some tips to help you figure out how to find the best savings account.
With savings account interest rates so low, it may be tempting to go with the first savings account that you find in your local bank. However, you are far more likely to find the best deal if you shop around. Take your time and compare the different savings account interest rates that are on offer, as well as any terms and conditions that apply.
Look Beyond Bricks and Mortar
Your savings no longer needs to be kept in a brick and mortar bank. You may be able to find a better savings account interest rate with an online savings account. As online banks have lower overheads, they can often provide better deals. The good news is that most online banks are still protected by the FDIC too, just like a traditional bank.
Be Wary of Promotional Offers
Some savings accounts lure you in with promotional offers, but when the offers expire you could actually end up worse off than if you’d chosen a different savings account. When you’re deciding what is the best savings account to open, you have to remember the long-term goal. Always read the small print and look at what the savings account interest rate will be once the promotional period is over.
Know the Terms and Conditions
On the subject of reading the small print, make sure you do this for any savings account (or other banking or investment opportunities) that you’re considering if you really want to find the best savings account. You may find out there are less fees that you need to pay that can reduce the return on your savings. There may also be conditions that you need to meet, such as having a minimum balance in your account in order to access the best savings account interest rate.
Combine With Your Bank Account
Although you should always shop around, it’s worth checking out what savings accounts your own bank offers. This can make saving much easier; you can set up transfers directly from your checking account to your savings account each month, ensuring that you’re always putting a little aside. The easier you can make it to add to your savings account, the more you are likely to save. That being said, the convenience may not be worth it if your bank’s saving account interest rates and/or fees aren’t very good.
Other Types of Savings Accounts
Before you decide what is the best savings account to open, be sure you consider all your options. Here are some other types of savings accounts you may not have thought of yet.
Money Market Accounts
Money market accounts offer a higher interest rate than most checking accounts and they’re offered by both traditional and online lenders. These accounts will usually have more restrictions than standard checking accounts, such as a minimum balance requirement and a limited number of monthly transactions.
Certificates of Deposit
Typically called CD’s, these are time deposit accounts. You deposit your money with your bank, and promise not to touch it for a period of time, such as 6-months, 1-year, 2-years, or 5-years. In return for this, your bank will give you the best interest rate they offer on their savings products. The longer the term, the higher your rate.
Alternative to Savings Accounts
Traditional savings accounts aren’t your only option to safely hold your short term savings. Here are a few alternatives that you might want to consider when deciding what savings account is best for me.
High Yield Checking Accounts
You may be able to find some checking accounts that offer a higher interest rate than savings accounts. To get these high yield checking accounts, you will usually have to meet certain criteria, such as maintaining a minimum balance or making a set number of transactions each month. If you can meet these criteria, these accounts could be a good option for you.
Now You Know How To Find The Best Savings Account
It’s time for you to put this advice into action and open up the best savings account for you. Consider all your options, read the fine print, and make a plan for how to keep your savings growing, and you’ll be on your way to your financial goals!