What to look for in a savings account?

It is normal to put your savings in the first free savings account you see in your local bank. Or maybe you are one of the old-fashioned americans that still keep their savings under the mattress. It’s all good to have these habits but, are they really helping your money grow? Unless you have a magical mattress or an excellent savings account, you more likely not taking advantage of the options in the market.

Financial entities have been evolving these past years to the point where making the decision of opening an account is as hard as deciding what major you should go towards or where in the world to live. Regardless of you instincts, all these situations require knowledge about them in order to make a smart decision. Picking a savings account is something similar for your financial life.

Must-know basics about savings accounts

• A savings account is a financial product where you can safely put your savings for any emergency or just to keep it there and make it grow. 

• Even though there are no law limits on how much money you should keep in your savings account, it is recommended to have  all your savings spread out in at least to banking entities, unless you are new to financial independence. In this case, you might wait until you have enough money to keep it in different entities. For specific advice on this, you can ask a financial expert for personalized counseling.

• Accounts with High Annual Percentage Yield (APY) can help your money grow because is the amount the bank pays you for “lending them your money”.

• Money in your savings accounts is not as accessible as the money in your checking accounts. It is necessary to know the difference of putting your daily expenses money in your checking account and your only real savings in the savings account. Federal laws limits the transactions - like withdrawals or transfers - on your savings one to 6 a month.

• Any amount is a saving. Even though a lot of people have important amount in their savings account, even $100 is a saving and that is a way to start earning money with it plus having it as a backup for any emergency.

Tips for choosing the right savings account

Decide your savings purpose

Depending on your savings goals, you can make the decision of which account is better for you. Ask yourself questions like What are you going to use that money for? When are you going to use it? How much money do you need/want to save?

We also recommend to set only one goal to your savings account, so there are no further confusions when you are trying to use the money. This does not mean that you should only settle for only one purpose, but to spread your money in different accounts depending on its goal.

Research and compare options

The first option is never the best way to go. At least is good to think that way. It is important to explore all the options in the market. Shop around and compare interest rates, conditions, details on the accounts management. There are aso online resources that can help you compare your options and better understand how each one is different to the other one.

Look for High APY’s

These rates may not be extremely high but every little digit matters. But be careful with it because rates are always changing according to the financial institution, so not only evaluate the APY now but also its tendency.

Consider online banking

Online banks have been offering very interesting and competitive rates in the market, you may want to take a look at their proposals as well. The high rates they offer are the result of the less expenses they have as online institutions.

If you want to keep it traditional, pick a local bank

If you like visiting an actual location and doing your transactions in person, pick a local entity. It can be a traditional bank, a community bank or a credit union. Even though their rates used to be higher, you can get a good relationship between the comfort of having a physical location and the benefits it can provide - like free ATM transactions.

Read the terms and conditions

Every bank has different conditions so do not take conditions for granted. In this part of the process, you should make sure to be aware of the possible fees they may charge you for using the account, the services fees, transaction fees, ATM’s fees, etc.