Start with the Minimum
It’s always good to have something extra tucked away for rainy days and emergencies, but more often than not, it’s easier said than done. Thankfully, most mainstream financial institutions no longer have ridiculous minimum requirements to open a savings account. You should be able to find a reputable bank where you can start a savings account with $100 or less.
💡 Fun Facts…
| 1) The first savings account was created in the early 1800s |
| 2) FDIC Insured savings accounts are insured up to $250,000 |
| 3) The average American has 2.5 savings accounts |
Savings Accounts
Just keep in mind that savings accounts are for saving, so there might be minimum balance requirements and maximum number of transactions without fees. In exchange, you’ll earn interest on your savings. In the last few years, there has been an increase in the availability of savings accounts without minimums or fees, but they may pay lower than other types of accounts. With the introduction of online only banks, you can earn higher than average interest rates (more details below).
Member-FDIC Banks
Savings accounts are a secure way to save and can be a good place for your money that you don’t want to take risks with, such as an emergency fund. If you put some money into a member-FDIC Bank savings account, the cool thing is the FDIC will insure insure this account by the maximum amount that the law allows for. You’ll also want to make sure you’re getting a decent interest rate. While savings accounts are more of a safe place to park your money, you won’t see a tremendous amount of growth from interest, although you do want a decent interest rate. Shop around before deciding to see who has the best offer.
Banking Online and High Interest Rate Accounts
Online savings accounts have surged in popularity because they’re able to pay higher interest due to little or no overhead like physical bank branches. Do research and find the highest paying interest accounts. Interest rates are expressed in terms of APY (Annual Percentage Yield), which is the interest rate you will earn each year. With interest rates rising in 2023, savings accounts have made somewhat of a comeback. As of March 2023, some savings accounts are offered with a rate of up to 5%. Websites like Bankrate.com will show you the highest paying savings accounts available online.
Is it Safe?
The short answer is, yes. The advantage of using an online bank is they offer the best interest rates on savings accounts. If they do charge a monthly fee, it’s generally lower than a traditional bank. Most are FDIC insured, but double check before you open an account. When you’re shopping for a bank to open a savings account, whether it’s an online bank or one with branch locations, here’s what you want to look for: a good interest rate, low or no monthly fee, no minimum opening deposit and automatic transfers (to cover overdrafts or deposits into the account). You’ll also need mobile check deposits (the ability to deposit funds on your smart phone via the banks app) and easy withdrawal so you can get to your money when you need it. Just remember, it’s your money, you worked hard for it so find it a good, safe place to save it where you can earn the most interest.
Alternatives To Savings Accounts
If you are looking to earn even higher interest rate, you should consider a Money Market Account (MMA) or a Certificate of Deposit (CD). Both of these usually pay higher interest rates than traditional savings accounts, but have some differences. An MMA works like a savings account, by may also have features of a checking account, such as a debit card or ATM access. They usually have a larger minimum requirement than savings accounts. A CD enables. you to earn a high interest rate, but you have to lock in your money for a specified period of time, ranging from months to years, the longer the period, the higher the rate paid.
OPINION
Saving for a “rainy day” is an important and powerful concept. Are you prepared for an unexpected major event or expense? What if you lose your job or have a medical emergency? You need to have enough money in savings to survive these possibilities. It’s not always easy. The first step is to track your budget so you know how much you can set aside each month for savings. If it’s not enough, look at your expenses and ways you can cut costs. You can also try to find new sources of income, such as side hustles.
