Last Updated on:

May 28, 2021

savings accounts

Most of us will have a savings account at some point in our lives. But many of us don’t really appreciate the power of it, or make the most out of it.

A savings account is a great place to keep money for a rainy day. It’s also a great place to keep money and invest for your future.

Here’s an article that breaks down everything you need to know about your savings account, and how to get the most out of it.

pink-piggy-bank-beach-travel-vacation-savings-sunglasses

As a customer, you have the option of opening a savings account at your bank, credit union or a online bank. A savings account is a great place to keep your money in safekeeping.

The money in your savings account is your buffer against life’s unexpected events.

In order to get the most out of your savings account, you will want to have money accessible should those emergencies arise.

Interest rates are currently at an all-time low, which is a massive frustration for savers. But there’s still plenty of ways to boost the interest you earn from your savings account.

So how do you get the most out of your savings account? Here are 10 top tips….

Checking and Savings account

A savings account is a regular savings account, which is issued by a retail bank such as Citibank, HSBC bank. 

The more money you put in, the more interest you get. In fact, saving money through a personal savings account really is a great way to make sure that you always have enough money for when you need it.

Bank Office Isometric Set

The description of a savings account from Wikipedia notes that in the United States, a savings account is defined as a bank account with low fees, relative secrecy, minimal or no borrowing of assets, and low-to-zero balance requirements.

  1. As of 2009 Savings accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) for the amount of their balances.
  2. According to the FDIC, there were about 2.4 million savings accounts in the United States as of December 2009.

Banks offer many services such as cash withdrawal from ATM machines, online payments to other individuals and payment of bills.

With a maximum deposit sum of $250,000, government-backed FDIC insurance allows you to rest assured your money is safe.

How do I choose a savings account?

Before you choose which account to save is better for you. You must understand why you need this type of account.

There are three key reasons for having an emergency fund:

  • to cover unexpected costs between 3 and 6 months
  • to pay off debt with a high-interest debt
  • to have sufficient funds when things happen unexpectedly such as a job loss
Bank client and manager discussing interest rate

Paying down a down payment, checking balance, transferring funds, paying bills — all of your banking transactions can be handled from the palm of your hand.

The thing to consider when choosing a savings account:

1. Interest Rate 

The national average is 0.10% APY It's the interest 

2. Required Initial Deposit 

Your bank account won't be much use to you until you've got a few bucks in it. It's common for banks to require an initial deposit of at least $100, but there are accounts that offer as little as $1.

3. Minimum initial balance required to begin earning interest

Depends on your bank. It might be as small as $1 ,$5 ,$25, $50 ,$100, $200 , $2,500, or $5,000. When opening a bank account you should always check with your local and regional banks.

4. Fees

Make sure that there is no minimum balance or deposit charge, monthly maintenance fee, unreasonable transaction fee, withdrawal fee, or transfer fee.

5. Accessing Your Money

Can you access money in your account using an ATM card from your savings? Or to access money, you need to be present at a branch.

what is high yield savings account?

Savings account that pay higher interest rates than regular savings accounts are called high-yield savings accounts

What is APY in a savings account? With a national average of 0.10% APY, the bid saver ranges from 0.01 to 0.5% APY for placing money in bank accounts.

High-yield-savings-account

Traditional brick and mortar banks have physical locations with full-service operations, appear to offer lower interest rates, and appear to have lower fees.

For a savings account worth $1,000, you get $5 for not having to withdraw the money.

On the hand, high yield savings accounts pay higher interest rates or APY relative to regular bank accounts. The APY is 0.7 to 1%.

how is interest calculated on a savings account ?

If you have savings of $ 1,000 put them inside a savings account with high yield interest Saving account with 1.05% APY . 

Let's work on the calculation

Savings

APY

Total Interest earn

$1,000

1.05%

$10.50

You end up with $ 1,010.50 next year.

If you have savings of $ 5,000 put them inside a savings account with high yield interest Saving account with 1.05% APY . 

Savings

APY

Total Interest earn

$5,000

1.05%

$52.50

You end up with $ 5,052.50 next year.

Let compare now, If you have savings of $ 5,000 put them inside a regular savings account just offer 0.1% APY. Let's work on the calculation.

Savings

APY

Total Interest earn

$5,000

0.01%

$5.00

You end up with $ 5,005 next year.

You can see now that the return on investment is very small, but this is the best way for capital to be invested.

1 percent APY is low relative to the return on investment, but savings accounts suit the function of flexible withdrawal if emergency funds are needed.

How much money should I have in savings?

The ideal cash to put into a savings account is 3 to 6 months of monthly expenses. This cash serves the purpose of surviving unemployment with emergency funds.

The U.S. spends an average of $890 a week or $48,928 a year on the BUREAU OF LABOR STATISTICS.

It is fair to assume that having $14,240 saved in your savings account during a recession helps you to pay off your six main costs for the next three months. 

Consider how much you spend on your expenses, such as lodging, transportation, food, health care/insurance, services and debt.

Follow the 50/30/20 Rule

You should always invest in your future if you still have money to spare. When it comes to saving for the future, the idea of investing can seem complicated, but it's really not necessary.

Whether you're a small business or a corporate giant, there's no need to panic about investing.

The 50/30/20 Rule is helpful; it suggests spending no more than 50 percent of income, 30 percent for essentials, and 20 percent for the Savings.

Think of your money as being in the buckets of three

  • 50 percent: Fixed costs such as bills for electricity, water, phone, vehicle, and mortgage or rent.
  • 30 percent: Discretionary funds instead of your needs, such as spending on your desires. It can be a movie, purchasing a new phone.
  • 20 percent: Save for financial targets such as future savings, retirement portfolios.

"Do not save what is left after spending; instead spend what is left after saving."


- Warren Buffett

which savings account earns the most money?

1. Consider a rewards checking account

Rewards checking accounts typically pay higher interest on balances. This is one of the best rates available.

In this case, the Kasasa Cash checking account from First Financial Credit Union pays 2.05% APY on balances of $7,500 or less.

Other benefits, such as sign-up incentives, cashback on debit card transactions, airline miles, and refunds on ATM fees, can be provided by incentive checking accounts. 

2. High-yield savings account

High-yield savings accounts, fully backed by the FDIC and your money, are a form of savings account earning a higher interest rate than a regular savings account. 

The reason it earns more money is that it normally needs a greater initial deposit, and there is less access to your funds.

Find out the best High-yield savings account here

3. Certificates of Deposit (CDs)

CDs for 6 months, 12 months, and 18 months. Deposit certificates of various period lengths.

That way, you have more access to your money than you usually have with CDs when taking advantage of the best CD prices, which appear to be higher than traditional savings accounts.

4. Money market account

Money market accounts are both an excellent place to save and an excellent vehicle for high returns in the form of dividends. The account is also secure with the FDIC insurance program. 

Best of all, you can open one within minutes through your trusted local bank or credit union.

5. Join a credit union

Credit unions are not-for-profit entities that are owned by members. So in the form of more favorable interest rates and reduced fees, credit unions return money to members.

At Alliant Credit Union, for example, you will earn 2.1 percent APY. However, if you maintain a $100 regular balance, your rate will increase to 2.5 percent APY.

It's becoming easier to become a credit union member. It can be as straightforward to apply to become a member as making a small contribution to an affiliated organization.

How many bank accounts should I have?

According to a CreditCards.com report, the most common debts U.S. consumers have are credit cards (55 percent) and mortgages (55 percent).

Basic RGB

While everyone needs at least one checking account and one savings account, there is an economic benefit to having one or two additional accounts as well.

Couples also hold joint income and spending accounts for the household's assets, mortgage payments on the one hand, and personal savings and checking accounts on the other

If you have a particular investment target in mind, separate and apart from your emergency fund, open a CD. A higher-yielding deposit certificate (CD) will guard against stupid spending and bridge short term funds for long-term goals. 

Before you start on your venture, make sure to leave a quick comment to let me know what you think of ‘How to get the most out of your Savings Account?’.

About the author 

Income Junctions

Business Idea & Investing for Solopreneur Income Junctions helps you to find ways to make money online, get inspiration and advice to starting a business on your own, and investing tips for solopreneur.

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