One of the quickest ways to sabotage your effort to save money…not having a separate savings account. But how do you choose a savings account that best suits your needs?

Having a designated savings account, separate from your checking, is paramount to a successful financial plan. By keeping funds set aside for a rainy day or paying for something special, you safe guard that money from being spent on something other than what you saved it for. Here are our tips on how to get started and how to choose an account as your nest egg grows.

First, lets talk about two types of savings accounts:

Savings Account: a deposit account held at a retail bank that pays interest. These accounts let customers set funds aside while earning a usually very small monetary return.

Money Market or High Yield Savings Account: a type of savings account that often requires a higher minimum deposit than a basic savings account. These accounts usually earn individuals a return at a higher rate than a standard savings account, while also keeping funds liquid and easily accessible.

HOW TO CHOOSE A SAVINGS ACCOUNT (THINGS TO CONSIDER)

Minimum Opening Balance

As you get started, look for the minimum opening balance requirements for the accounts you are considering. When it comes to a money market, these requirements tend to be higher and may act as a barrier to your ability to open an account, for now.

Annual Percentage Yield

Interest rates – ain’t what they used to be. The best options in February 2024 range from 4.3 – 4.5%. But be on the lookout for promotional periods!. Once the promotional period is over you can end up with a less than competitive rate.

Transfers

Most High Yield Savings Accounts limit the number of transfers from the account per month. Considering this is where you are putting your money so you don’t spend it, this should not be much of a problem. However, it is important to be aware of these details.

Locations & ATMs

When it comes to a savings account with the bank you already use, this will likely not be an issue. However, many of the institutions offering savings accounts with competitive interest rates do not have many (or any) brick and mortar branches. Consider this important detail if you want your savings to be more accessible in cash.

Customer Service

While a good deal is great, excellent customer service is important to consider. Do your research and use a trustworthy institution with excellent reviews in customer service.

Fees & Fine Print

Be sure to read through and understand any details relating to fees, promotional periods etc. that are pertinent to your use of the account.

Budget & Lifestyle

Consider how the account fits in to your financial strategy, budget and lifestyle. If there are too many restrictions, too high of a minimum balance, no access to ATM’s etc. you need to make sure it suits your specific needs.

Why We Prefer High Yield Savings Accounts

The key take away:

A standard savings account at your current bank is a good place to get started, but it is not the best place to keep your savings. To optimize your finances and start earning interest on your savings, consider making the move to a High Yield Savings Account. This allows you the best of both worlds, benefit from earning more interest while still keeping funds accessible when you need them.