Opening up a traditional savings account can help you to set aside money for emergency needs but when you look at the interest rate on a savings account you may be shocked to see just how little you are earning. The biggest limitation to a traditional savings account is the interest rate and when you compare the rates to a high yield savings you can easily earn 5 times more than what you are already earning.
Finding A High Yield Savings Account
A high yield savings account may be offered from your local bank or you can find online banks that will offer one to you. In most cases high yield savings accounts are only offered to individuals that have been loyal customers for many years. These accounts may also be offered to individuals that have a certain amount of money to deposit in the account. The deposit requirements vary by bank but they usually start around $5K or higher. The more money you are willing to deposit to the savings account, the higher your interest rate will be. Banks with high interest rates on their savings account usually ask that you also meet the following requirements:
- Maintain a large balance in the account
- Limit your transactions from the account
- Continue banking with them for many years
Since the local banks usually only offer the high yield interest savings to select customers, it is a smart idea to compare savings rates online. This will open you up to a number of other banks with higher interest rates and can help you to grow your money quickly.
The Importance Of Comparing Rates
The internet bank accounts are known for offering savings with high interest. They can offer higher rates as they do not have as many overhead costs to worry about. Not only do they offer high interest rates for savings accounts, many of them do not ask you to have a large initial deposit requirement to open an account. You can easily gain an interest rate that beats what your bank is offering by 5 times with only depositing $1 to open the account. Using the online comparison tools like ours, you will be able to find out which banks are offering the highest interest rates along with deposit requirements and other things:
Gathering Valuable Data
Once you use the comparison chart, you need to write down information from about 5 different banks. Compare the interest rate on their savings account, CD accounts, money market accounts, and even checking account. The more information you can get, the easier it will be for you to start meeting your savings goals. Do some calculations with the current interest rate to see how much money you will be able to save when you invest a certain amount each month. This is a great way to help you prepare for short-term and long-term savings needs.
Contacting The Bank
As you are doing some high yield investing you need to be 100% sure that your money is going to be safe. Call the various banks that you are comparing and make sure they are backed by the FDIC and also find out what type of security and account protection they will be able to provide. It is vital that your money is safe and protected. Usually the high yield accounts mean you are investing a lot of money so you need to be sure that if the bank fails, you will be able to get all of your money back.
Reading The Terms
Carefully go through the account terms and look for expiration dates on promotional offers and other things. You also need to look over their website and check it for security and ease of use. Becoming familiar with the bank as much as you possibly can will help you to know that you are making the smartest investment possible. Usually the minimum balance requirement is one of the biggest attributes to consider when you are comparing savings accounts. The withdrawal limitations are the other thing that you need to become familiar with. Do you commonly make a lot of withdrawals from your savings account each month? If you do, it may not be a smart idea to invest in a high yield savings account as they do set limits on withdrawals and can even imply a fee on the account for having too many withdrawals.
Knowing Your Goals
Is it better for you to open a savings account with a lower interest rate so you have more flexibility with the account or should you opt for a high yield savings account? You need to know how you save money in order to choose between the different types of accounts in order to select the right investment for your needs. If you need the account to be easy to access and you need to be able to get the money out right away, opting for a high interest savings account online or at your local bank might be a better decision than the high yield savings account. Look at the way you have saved in the past and know the balance that you usually keep along with the amount of money you deposit and withdrawal from the account each month. This will help you in making the right decision when selecting accounts.
Additional Investment Options
Any time you are planning to deposit more than $5K into a high yield savings account you need to stop and consider if there are other investment options for you to work with. Younger investors are best advised to take the extra money and place it into their Roth IRA or Roth 401(k). Older investors might want to consider using a tiered CD investment approach as this allows you to continue investing and having an “income” through your retired years. Looking at the different types of investments offered by the bank can help you meet not only your short-term savings goals but also your long-term retirement goals as well.