Not All Savings Accounts Are Created Equal
Most of the big banks here in the U.S. offer meager savings rates for your hard-earned money, but it’s not all bad! You can still find great high yield savings accounts elsewhere. Here are some tips on how to do that.
Where Do You Stash Your Cash?
Jane talks about the simple, but super important concept that where we actually store our money (specifically our savings) matters. Why? Because savings accounts offer varying interest rates on our money. In other words, not all savings accounts are created equal, and we could be unknowingly cheating ourselves by where we choose to plop our money.
So, the first step in figuring out if you’re getting the most out of your savings account is to figure out where your current savings account is and what rate that institution is offering on your money.
Maybe you had a savings account opened for you when you were younger and have been depositing into that bad-boy without considering that you could be earning more on that money elsewhere – ooops! Maybe you opened a savings account with the same bank that operates your checking account out of convenience and never thought too much about the interest rate they offer. To figure out if your savings account is working as hard for you as possible, first you’ve gotta know where it is, and what the rates are.
So, I figured out where my savings account is and what the rate is, but is there something better?
Once you know the rate your bank is currently offering you, it’s time to get out there and start doing your research. Compare, Compare, Compare! One great tool mentioned by Three Thrifty Guys to compare rates on savings accounts in general and for finding a high-yield savings account is from Nerd Wallet. The tool lets you filter by location, initial deposit amount, and even tells you the minimum balance you need to maintain to earn interest.
You might find that you’re already earning a pretty decent rate on your savings with your current bank, or you might find that you could be earning more. Our friends over at Three Thrifty Guys learned they could be earning a whole percentage more of interest each year by switching to a high-yield savings account. Wowza!
Lastly, there a couple other things to keep in mind when evaluating a savings account.
- Variable Rates – Savings account rates can change without notice and can even shift daily at the discretion of the bank or credit union. The interest rate you get when you open the account might not be the same rate a few months or a year later.
- Transaction Limits – The law says you can only withdraw from a savings account 6 times in a month, otherwise you could be slapped with a penalty or even risk account closure.
- Fees – Some savings accounts carry monthly maintenance or service fees and have minimum balance requirements. Be sure to read up on the account’s fee schedule before deciding to stash your cash there.
There are a ton of things you can’t control when it comes to money & savings (cough, interest rates set by the Fed, cough), but there are some things you can, like where you put your money. When you’re aware of what else is out there, you’ll be able to make informed decisions about how best to make your money work for you.