How to choose the best savings accounts

Define the purpose of your account

Each person has a different goal when it comes to creating a savings account. For some, the money can be used for a large short-term purchase, while for others it can mean paying for the children’s college. Once you define the purpose of the account, it will be time to go to the bank to learn more about your options. In certain cases, users prefer to open a savings account in a bank other than the one they regularly use, as this avoids the temptation to access the resources.

Consider the appeal of each account option

All banks offer different attractions. Bank of America, for example, has a tiered savings system, where the more money you put into the account, the more interest you can earn. You can also find banks where you get benefits like cash back for every purchase at establishments like supermarkets and restaurants. You could even program a rounding system, where all that surplus goes to your savings account.

Take into account the requirements

One aspect that you can never overlook is the terms and conditions for opening the account, as well as the necessary documentation, such as a social security number, an updated proof of address and an email account. Take the time to read the account opening agreement and identify what the conditions will be. For example, the minimum balance requested and the commissions that are charged each month or for the use of the account.

Short-term savings

In the case of short-term savings, users tend to choose savings accounts with easy access. This means that you can access your money at the time you need it without having to pay any type of penalty. In order to obtain the maximum benefit from this type of account, it is best to select an option that does not condition the user to make a withdrawal for a minimum amount per month.

Long-term savings

Long-term are the best savings accounts for people looking to purchase a home, a car, or pay off college for themselves or a family member. Some types of long-term savings are certificate of deposit accounts or individual retirement accounts; the former offer, on average, an annual percentage yield of 0.05%, while the latter allow access to money at any time, as long as the user meets the requirements such as being 59 and a half years old, and having started the savings account five years in advance.

The best savings accounts: commissions and interest

The main interest of a savings account is to guarantee that your money is insured and that it produces, little by little, a return. In this sense, it is important to carry out an exhaustive investigation to access the best savings accounts for your short and long-term plans. In the United States, the average interest rate for a savings account is 0.06%, while a high yield account will yield an interest rate of 0.5%, which will grow your savings in less time.

Minimum balance in the account

The purpose of a savings account is to help you maintain financial stability in the short and long term, for which it will be necessary to maintain a specific balance, depending on the type of account and the bank in which you open it. For this reason, it is important to ask what is the minimum balance that a bank requires and what are the penalty rates in case of not complying with it, in order to compare all your options and choose the one that best suits your budget and financial objectives.

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