Secrets To Selecting the Right Savings Account

If you are looking for a way to build up an emergency fund or save to buy a home, you should consider opening up a savings account. By keeping your savings separate from the money you use to pay bills, you can easily start saving for the future. With many employers offering to directly deposit paychecks, saving for your future has never been easier. You can automatically save a portion of your check every time you get paid.

With so many types of savings accounts, how do you know which one is best for you? Read on to find out how to select the right account.

Types of savings accounts

There are many different types of savings accounts on the market today. Names will vary based on the bank, but they are essentially set up in the same way.

Basic savings – Most banks offer a basic or a regular savings account. These are often easy to open and have few restrictions. Often times, they don’t require you to keep a minimum balance in your savings account. These accounts can be opened quickly and are a great way to keep your savings away from your monthly operating funds. Basic savings accounts typically pay a very low interest rate.
High-interest savings – Just as their name implies, a high-interest savings account pays you a larger percentage of interest than a basic savings account. These savings accounts typically require that you carry a larger minimum balance to order to get a higher interest rate. If your balance falls below this minimum, you can be charged a high fee.
Jumbo savings – These savings accounts are designed for people who have a very large balance. These accounts pay a much higher interest rate and usually require a minimum balance of at least $100,000.
Money market accounts – These accounts combine features that you’ll find in both checking and savings accounts. They pay a higher interest rate than what you’ll receive in a checking account but allow for some check-writing ability.

These types of accounts of traditionally offered by brick-and-mortar banks. Online banks will typically offer savings accounts that are similar to those offered above as well.

How do I pick what’s best for me?

When deciding which savings account is best for you, consider the following;

Fees – How much will you pay each month? In some cases, fees can add up and actually be higher than what you earn in interest. Fees may be charged for monthly maintenance, but you could be charged if you transfer money in or out of your account or request statements.
Minimum balance – Does the account require that you keep a minimum balance in your savings account? Or does it require that you make a minimum monthly deposit? If you think you may struggle to keep a minimum or making deposits each month, go with a savings account that is less restrictive. You can always ask about converting this account to a better one when you’ve built up your savings.
Interest rates – Compare the rate of interest that you will earn between the different types of accounts. Higher rates always seem better, but if you may not be able to meet the minimum balance or the fees are very high, this may not be your best choice.

You should also consider how interest is calculated. Interest can be compounded, or calculated, on a daily, monthly, or annual basis. The more frequently interest is calculated, the more you can earn in interest. Accounts that compound daily may be more attractive than those that compound monthly or annually.

Perks – Some banks will offer special deals when you open up a savings account with them. You may be able to get a better interest rate or have the minimum balance requirement reduced. While these deals can be great for you in the beginning, be sure to read the fine print. There may be future restrictions that kick in.
Relationship – Consider the type of relationship that you wish to have with a bank. If you are merely looking to open a savings account, either a local branch or online bank will work. Those who are seeking convenience may choose to go with an online model that allows for remote deposits and easy online banking access. If you need easy access to ATMs, you may want to open up an account the local branch of a larger bank.

In some cases, you may be looking to establish a banking relationship for a future need. People who are looking to buy a home, get a loan, or start a business at some point, may find that opening a savings account at a local bank is the best option.