Best Savings Accounts
A savings account is a great place to keep your emergency fund and earn interest. Savings accounts are easy to open and often have lower fees and minimum balance requirements than checking accounts. The Consumer Finance Protection Bureau recommends having at least $400 in a savings account as an emergency fund. However, it’s better if you can have at least three months of living expenses in your fund. Just putting aside $5 to $10 a week can go a long way towards achieving financial security.
Common Questions
How do you compare savings accounts?
Every bank’s savings accounts are different. In order to compare savings accounts and find the right one for your situation, you must first identify which features matter most to you.
For example, if you are looking to minimize costs, you may prefer a bare-bones account with low or no fees. Or maybe you’d to maximize your returns and don’t mind paying a little extra for it! Wherever your priorities lie, the right savings account is out there. You just need to know what to look for.
What should you consider when comparing savings accounts? Here are the main factors:
- Interest rate yields
- How often do the interest rates change
- Minimum deposit requirements (for the account, to earn the top yield, and to waive the monthly fee)
- Restrictions on withdrawals or transfers
- Account features
- Procedures for closing an account
- Quality of customer service
- Availability of branches
- Fees (overdraft, deposited item returned fee, incoming wire transfer fee)
The ideal account would have an interest rate on the higher end that doesn’t fluctuate too often, a low minimum deposit requirement, minimal fees, great customer service, and minimal restrictions/penalties on withdrawals or transfers.
What do you need to open a savings account?
When you are ready to open a savings account, you will need to provide the following:
- A valid, government-issued ID
- Your current bank account information (account and routing numbers)
- Your basic information (name, SSN, address, email, phone number, etc.)
- The minimum deposit amount (if applicable)
These are the basics most banks will require, but it can vary depending on the financial institution.
Why open a savings account?
A savings account enables you to separate the money you want to save from the money you want to spend. The saved money becomes less accessible than the money in your checking account, as Federal law limits you to six transfers or withdrawals from your savings each month. If you exceed this limit, there is typically a fee.
In addition to helping you save, your savings account also earns you a small return each year on the money kept in the account. However, if you consistently surpass transfer limits, the bank may convert your account into a non-interest earning checking account.
How much will I earn in a savings account?
The amount you can earn in depends on the interest rate you get and the amount of money you deposit. According to CNN Money, the average savings account has a 0.06% annual percentage yield, while many big banks pay 0.01%. That means if you have $10,000 in a savings account, the average you’ll earn back over a year’s time is $60.
However, according to Consumer Reports, online banks pay an average of 0.93% interest and some pay up to 1.6%. If you land an interest rate of 1%, you will earn $100 on $10,000 after a year.
Online banks have greatly increased their interest rates over the past few years as they compete to win customers. Traditional banks still hope they can win over customers through the access to branches and ATMs.