Building a savings account is one of the smartest financial decisions you’ll ever make. But, many of us fall short in reaching this financial must-do. In fact, 35% of American adults have only a few hundred dollars in their savings account. What’s even worse is that 34% of adults have nothing put away into savings.
Saving is hard, especially when you don’t have a budget. Saving is even harder when you’re putting money away, only to earn a few dollars in interest at the end of the year. In order to maximize your savings fund and to encourage you to keep saving, you want to find a savings account that offers a decent APY.
Keep reading to learn how having good interest accounts can benefit you.
Earn More on Your Money
We’re creatures of habit and chances are that years ago you opened both a checking and savings account at a bank that you were familiar with at the time. Despite the low APY and marginal growth, you’ve kept your money there because it’s what you’re familiar with. The problem with this scenario is that you’re missing out on hundreds of dollars each year!
By switching to a high-yield savings account, you can reap the rewards of a high APY. There are banks that offer interest rates that are 10 to 18 times higher than the measly national interest rate. Banks like CIT operate entirely online so they’re able to save tons of money on overhead expenses as there are no brick and mortar branches to maintain.
In turn, these savings translate to higher interest rates, allowing your money to grow quicker than ever before.
Another benefit of using good interest accounts is that there are generally low or no fees. Unlike a traditional account that requires a minimum balance and charges monthly account maintenance fees, you won’t typically incur these costs with a high-yield account. Again, this is because banks that offer high-yield accounts have little overhead to pay.
The Types of High-Yield Accounts
Convinced that a high-yield account could greatly benefit your financial situation now and long into the future? If so, you’ll want to start by understanding the two main types of high-yield accounts. The first type of high-interest account to consider is a savings account.
A high-yield savings account isn’t very different from a traditional savings account, except the fact that you’ll be able to enjoy the benefits of a high APY. There are banks that offer APYs as high at 2.50%! This is a huge step up from the national average. With a high-yield savings account, you’re able to freely deposit and withdraw money as needed. The only thing you’ll need to be aware of is if there’s a minimum balance requirement associated with the savings account.
The second type of good interest account to consider is a certificate of deposit (CD). CDs are similar to savings accounts in that they also offer high APYs and can significantly grow your money. The main difference is that CDs cannot be withdrawn on a whim. CDs come with a set term limit, which can be months to years. For example if you open a 1-year CD, you’re unable to touch the funds for at least a year, otherwise, you’ll be penalized.
So how do you choose between a savings account or a CD? It all comes down to your financial situation and what you’re planning to do with the money.
If you want to have access to your funds at all time because they may be used to cover the cost of an emergency, you’ll want to stick with a high-yield savings account. On the other hand, if this is money that you don’t need access to, it makes more sense to choose a CD.
Finding a CD
The good news is that you should have no problem finding a CD! In fact, most banks offer them as one of their investment accounts. But, if you want to earn top dollars on the money that you deposit into the account, it’s best to use an online bank. Digital banks operate solely online and are able to quickly process applications.
Before submitting information to open a CD, be sure that you’re applying for the right CD that best meets your needs. there are banks that offer term, jumbo, and other types of CDs, depending on your financial requirements and goals.
Once you understand the benefits of high-interest rate accounts, it’s easy to see just how useful they can be in building your wealth and making the most of the money you set aside to save. Keep this information in mind to not only choose the right CD but the right account provider as well.