If you want to be financially stable, a savings account is a must-have. Checking accounts may give you faster access to your money, but they do not provide many benefits beyond that. In fact, keeping all or most of your money in a checking account is an easy way to lose it. That’s because checking accounts offer little to no interest on your money, so you are missing out on potential passive income that you could be getting with other types of accounts.
Plus, since inflation increases faster than whatever interest your checking account is likely paying you, your money is actually decreasing in value over time.
Fortunately, there are other banking and investment options that can give you relatively quick access to your money while also paying you more in the long run.
Ultimately, choosing the right savings account can be the difference between growing your savings and letting them remain stagnant.
There is a wealth of different accounts to consider, with many online savings accounts becoming the preference for a lot of Americans due to their convenience. Read on to learn more about a few popular savings options.
1. Let Your Money Grow in a High-Yield Savings Accounts
A high-yield or high-interest savings account is usually an option that you can access online, although in certain cases, you might be able to open this type of account at your current bank. It is worth remembering, however, that the best savings account interest rates will be offered online.
High-yield savings accounts offer an interest rate that is far higher than that of a regular account, in some cases 25 times higher.
Of course, while this may sound appealing, it is important to consider the conditions of opening an account like this. Most high-yield accounts require a larger initial deposit than a regular account does. Some may also require that you keep a minimum balance in the account at all times. Additionally, some of these accounts come with annual fees, so this should be factored into your decision.
Finally, high-yield accounts usually come with more strict rules about how many withdrawals you can make during a certain period of time. Therefore, it is best to deposit only as much cash as you are okay not having immediate access to.
The American Express personal savings account is widely considered to be one of the best high-yield accounts. However, it comes with a relatively high initial deposit requirement. Most Americans will be able to enjoy the perks of a high-interest account through other companies that require much lower initial deposits.
2. Look Into Money Market Accounts
Money market accounts are held at a credit union or a bank and often offer much higher interest rates than a regular savings account, making them very similar to the high-yield savings accounts you may be able to find at most banks.
Additionally, unlike a traditional savings account, your money market account may offer a debit card and checkbook. It is important, however, to not confuse this type of account with a money market mutual fund, which relates more to investing than saving.
When it comes to money market funds, the VMFXX, otherwise known as the Vanguard Federal Money Market Fund, is a good example of this. While this type of fund may be a beneficial investment, it is not the same as something like a PNC money market account.
Money market accounts are great for those looking for a low-fee account with a relatively high annual percentage yield (APY). Capital One’s money market rates are some of the best around and also give you the option of not having a minimum deposit.
Other money market accounts, on the other hand, may have minimum deposit requirements, although these are usually quite low compared to high-yield savings accounts.
In most cases, your money market account provider will require a minimum balance to be maintained along with the minimum initial deposit, so it is important to check what this is before opening the account.
Some of the major benefits of money market accounts are that they offer a secure insurance that is protected by the FDIC. Most notably, though, money market accounts usually give you quick and easy access to your money, so they may be a good option for storing your emergency fund.
3. Consider a Certificate Of Deposit
If you have a large amount of money in your savings that you can afford to leave alone for a period of time, then a certificate of deposit (CD) may give you some excellent interest advantages.
CDs are a lot like the previous types of accounts mentioned above, but they usually have more strict withdrawal requirements in exchange for higher interest earnings.
Some of the best high-yield CD’s offer an APY as high as 1% per year. However, the main reason that this type of account is so attractive is the premium interest rate offered by the account provider in return for an initial lump sum that is not withdrawn for a pre-agreed period.
You will find that most financial institutions have an option for this type of account. However, as with any type of account, it is a good idea to shop around and use a CD calculator to determine what the best possible rate is.
It is commonly understood that online banks will offer a better interest rate than banks with physical locations might, so it is worth taking a close look at these. For example, Capital One CD rates stand between 0.5% and 1% APY depending on how long you leave your deposit. What’s more, there is no minimum deposit, so no matter how much you have to save, you can benefit from the perks of this account.
One of the most recognizable names in the financial world is Discover, and the Discover CD rate is not something to be sniffed at. Leaving your savings untouched for just 1 year will give you an APY of 0.90%, and if you can leave them alone for 5 years, the APY jumps to an impressive 1.05%.