A savings account should be one of the staples of your financial plan. You need a safe place to keep your money, and you need a savings account that fits your needs. While saving account rates should be a big part of your decision, there are a few other considerations when it comes to figuring out what is the best saving account for you:
What Will You Use the Saving Account For?
Your first step should be to decide what you will use the account for. Is it a short-term savings account where you can build up a balance that can be used in a few months to pay for a vacation or a shopping spree? Do you want to use the account as an emergency fund? The purpose that you have for your saving account is important as you decide what is the best account for you.
If you want an account that is very liquid and instantly accessible, for use in emergencies, you might consider opening an account at a local brick and mortar financial institution. Even though you might get better savings account rates elsewhere, if instant access to your money is important, you might be willing to sacrifice the interest earnings. You can also create a savings plan where a smaller amount of money is in a more accessible account, while the bulk of your emergency fund is kept in an account with better savings rates. You have to plan, though; in the case of many online high yield saving accounts, it can take up to four business days for you to get your money out.
In most cases, the waiting period for getting your money isn’t such a big deal – especially if you have an adequate amount of room on your credit card, or cash in a safe place, that you can use in a pinch while you wait.
Protecting Your Money
There are number of ways that you can protect your money once it is in the bank. Most importantly, you should also consider FDIC insurance. Once you have an idea of where you might want to open a saving account, you need to verify that your money will be protected. FDIC insurance will protect your account up to $250,000. This means that you will get your money if the bank fails. This is important. If you put your money in a bank without FDIC insurance, you could lose it if the bank fails.
Bank failure is not the only issue that you might run into as you look for the best saving account for you. You want to protect your money from fees as well. Some financial institutions charge monthly fees – no matter how much money you have in your account. Others will only charge you if you fall below a minimum amount of money in your account, or if you don’t make a certain number of deposits each month. Make sure you understand the fee structure associated with your savings account before you commit. There are still plenty of banks and credit unions that offer accounts without fees.
Another item that you need to be aware of as you protect your money is that savings accounts have limits on how many withdrawals you can make. The Federal Reserve limits withdrawals to six each month. If you go beyond that, the bank is required, by law, to either close your account, or to change the designation of your account. This will result in the loss of your high yield interest rate, and it is also likely to result in large fees by your bank. Note that the Fed regulation sets the upper limit at six. A bank, though, can set the limit lower. Many financial institutions have a limit of three or four withdrawals a month. This way, you can be charged a fee if you go over, but your account doesn’t have to be closed or changed.
Watch out for rewards and cash bonuses. Many of these promotions require that you fulfill certain requirements each month for two or three months. Others require that you maintain a certain balance for a set period of time. If you don’t meet the requirements, you won’t get your cash bonus, and you might find that you have wasted time with an account that doesn’t really fit your needs.
Finally, consider customer service. You want to think about the ease associated with opening an account with that financial institution, as well as the reputation for customer service. In many cases, especially if you won’t be doing much beyond building up your savings account, customer service isn’t a big deal. But you should check for glaring problems. You want access to your money when you’re ready for it, and poor customer service can limit your access. Read online reviews, and check with the Better Business Bureau to find out about possible problems.
Getting the Best Savings Account Interest Rate
Once you have an idea of what to watch out for as you choose the best savings account, you can begin looking for the best savings rates that fit your criteria. The Internet is a great place to start. You can get a list of the best rates from all over the country. There is no need to limit yourself by geography. If the best rate is offered at a financial institution across the country, you can make it work. Technology provides us with a number of ways to bank remotely.
As you sort through your options, look at the restrictions and requirements associated with the account. Don’t be blinded by the interest rate. Most aggregators also include information about minimum initial deposit requirements, as well as minimum balance requirements. Make sure that you can meet the requirements before opening the account. Sometimes, you have to accept a slightly lower interest rate in exchange for a little more flexibility with the account.
In the end, the best saving account for you is largely a matter of personal finance, and your needs. Be sure to carefully consider your options before deciding. The best savings rates are important, but there are other considerations as well.
