Ins and Outs of Saving Accounts and Interest Rates

A savings account is probably one of the first things on everyone’s mind when it comes to securing your money for emergencies or other essential events. A savings account can be an ideal place to park or lend your money, in return you can obtain certain financial growth with a certain interest rate commonly referred to as a high-interest savings account.

However, there are different types of saving accounts that you can consider depending on their financial benefit offerings and interest rates. Traditional saving accounts, high yield, money market accounts, certificates of deposits, cash management accounts, and special savings accounts. Sounds overwhelming? We can understand how perplexing it can be when it comes to deciding on the right source to save a few dollars.

Which account type is considered the best savings account interest rates? And whether it is reliable and safe. We understand your concern, whether you are a newbie teenager or an experienced adult. This blog is a complete guide that will help you contemplate the different saving account types and select the ideal one for yourself.

What is a savings account?

A savings account refers to a deposit account that bears a specific interest rate, offered by multiple banks and other financial institutions. However, these saving accounts tend to offer moderate interest rates, even though individuals prefer opening saving accounts as it provides safety and reliability to set aside certain dollars for a determined period for their financial growth and meet with uncertainties efficiently.

Usually, savings accounts have limitations on the number of times for fund withdrawals per month. It has become one of the preferred options as it offers flexibility, wherein individuals can feasibly build hefty funds for emergencies, or consider fulfilling short-term goals like buying a car, home, or other accessories. Or lastly, you can consider this account when you have surplus cash at your hand, and you know you won’t need these dollars shortly in terms of regular expenses.

How does a savings account work?

Usually, banks and other financial institutions use saving accounts for loans as it is one of the essential sources to build funds. This is the sole reason, you will find savings accounts virtually at every bank or credit union whether they are brick-and-mortar or exclusively online operate only.

The interest rates offered by varied banks differ vividly, except promotions banks usually provide fixed interest rates up to a specific date or tenure to their clients. However, banks and union credits may change their interest rates at any time, the higher or more competitive interest rate, it is more likely that the rates would be expected to fluctuate.

When it comes to saving accounts in banks, you need to check as there is a requirement to maintain a minimum balance in your account to avoid monthly fees or maximize your profit from the published rates, while other institutes may not have any requirement for a minimum balance. Ensure, you learn the rules of an account thoroughly so that you can practice bifurcating your income with fees with ease.

You can transfer money in and out from saving accounts either online, at a branch or ATM, or via direct deposit or electronic transfer. In addition, transfers can be arranged by phone.

Some banks have rigid rules including permitting only 6 withdrawals per month from your savings account, exceeding the number of withdrawals banks may charge you fees, convert your savings account into a checking account or completely close your savings account. However, the amount of withdrawing money is restricted to the money deposited in your account.

Rember, the interest that you earn from a money market account, certificate of deposit, or checking account, the interest earned via a savings account is considered taxable income.

Why should you allocate your money to a savings account?

If you are wondering whether putting my hundreds and thousands of dollars into a savings account is a good idea or not then you have arrived at the right place. We have listed below a few pointers catered to solve your worries and give you an adequate answer.

1. Earn modest interest rates

One of the greatest perks of putting your money into a savings account is you can benefit yourself by earning interest from your balance. While, you can check out a few checking accounts as well that offer you moderate interest rates, however, not all checking accounts will provide you the same perks. Your hard-earned money held in a non-bearing interest account won’t give you room for long-term financial growth.

2. Secure funds for emergencies

If you haven’t opened a savings account yet, this is the right time to get started. Even if you don't have a determined saving goal in your mind, it can turn out to be a helping hand in emergencies.

Having a savings account can help you regulate your daily bills and other expenses in case you lose your job or you break your car. You won’t have to depend on high-interest loans or credit cards. And, in case you face any financially critical situation yet, you can use your emergency funds, you can opt to continue growing more money with adequate interest in your savings account.

3. Helps you save than overspending

When you have a savings account, you will avoid overspending your money on non-essential assets and dedicate those dollars to earmarked for specific expenses. If you choose to keep a checking account, you will be motivated to spend more through the account due to flexibility and lack of limitations, rather a savings account will help keep control over your spending and save for future endeavors.

4. Safeguards your cash

Yes, you heard it right! Putting your money into a savings account can protect your cash. For instance, there is a chance of your money getting stolen if it were kept at home, or if you are walking on the street with a wallet full of cash can keep you at risk of theft or major loss.

Though, keeping your money at the bank in your savings account will be kept safe as the bank is insured by FDIC and the credit union is insured by NCUA, which assures you to protect your money in all uncertainties. As of 2022 rules, per depositor, account type, and financial institution your money would be protected until $250,000.

Types of Savings Accounts

As we discussed above, savings accounts in the USA have several types with different benefits and differences in interest rates. Let’s dig in deeper and help you select your ideal option to safeguard your money and open the doors to your financial growth.

1. Regular Saving Account

Ideal option for individuals who are seeking short or long-term savings and aren’t concerned with the best saving account interest rates.

Traditional or regular saving accounts is one of the common types that everyone is aware of and thinks of when anyone mentions saving accounts. This account allows you to earn interest rates over your money, however, it offers a very minimal interest rate than other savings account offerings in the market. The advantage of this type is, many banks and credit unions allow you to open a regular savings account with a minimal deposit.

Regular savings account permits clients 6 withdrawals per month, excluding ATM or in-person withdrawals at the branch before charging extra fees. In addition, banks and credit unions may permit you to have access or manage your account online, via mobile or E-banking, or by phone or at the branch.

2. Money market Accounts

This is an ideal option for individuals who want to earn high-interest rates from saving and also wish to have more options for accessing money.

A Money Market Account is a combination of the features of a savings account and a checking account. If you are wondering, where can I find this type of savings account then you can open MMA at brick-and-mortar banks, online banks, and credit unions easily.

This account also referred to as a Money market Savings Account (MMSA) offers you an opportunity to earn interest from your saved money. With MMSA you can feasibly write checks from an account or collect your money through an ATM or debit card.

This type is similar to regular saving accounts with a limitation of 6 withdrawals per month. Exceeding this limit can result in institutions closing your account or triggering fees if this occurs very frequently.

3. High Yield Savings Account

An ideal option for individuals who want to earn a higher interest rate from a savings account with minimal fees.

High-yield savings accounts are accounts that offer higher APY compared to regular savings accounts and are found at online banks, and online credit unions. The higher-interest rate savings account aids people maximize money growth.

Usually, online banks offer different types of higher-yield savings accounts to their clients to attract them with higher interest rates compared to other brick-and-mortar banks and credit unions. If you are someone comfortable managing your savings account through a website, or mobile banking than visiting a branch, you have found the best savings account option.

In addition, online banks charge minimum fees which include monthly maintenance and excess withdrawals.

4. Cash management Account

An ideal option for individuals who wish to keep their cash accessible for retirement or brokerage accounts.

A Cash Management Account is different from other savings accounts as it is not designed especially for saving money. This account helps you hold the money that you would like to invest in a retirement account or taxable brokerage account for a secured future.

Usually, online brokerage or robo-advisor platforms may provide cash management accounts to investors. The money held in a cash management account can benefit you with higher interest rates compared to other savings accounts at banks.

Depending on the type of brokerage account, you can expect to obtain a few features even with a checking account. For example, with a cash management account, you can transfer funds to other banks, pay bills, and more.

5. Specialty Savings Account

An ideal option for individuals who want a savings account for specified goals.

This account is designed to help you save for determined goals rather than saving for all the money that you know you won’t decide to spend. In addition, you can Make Money using this account for a person rather than a goal.

For instance, there are options for savings accounts available for minors. The common 3 types of accounts that you can consider opening for your children.

Student savings account
Custodial savings account
Kids savings account

You will find these accounts at banks, brokerage or investment companies, and credit unions. Opening more than one specialty savings account is possible for a specific goal or individual. However, there can be restrictions on withdrawals - when and how to withdraw funds.

6. CD Account

This is an ideal option for individuals who want to earn interest and do not want access to their savings right away.

Certificates of Deposit accounts are time deposit accounts which means you agree to put your money in the account for a certain time. During this tenure, you will earn interest from your money, and when the CD matures you can either choose to withdraw your money or renew your CD account.

Additionally, you can find a CD at traditional and online banks, and usually, CD terms offer a tenure range of 30 days to 60 months. In some cases, longer-period CDs will offer higher interest rates.

Read Also:- Saving Strategies for a Brighter Financial Future

Minimum amount to earn APY: $01,000

The minimum deposit for an opening account: $0

Monthly fees: $0

Read Also:- How To Save Money If You Are A 20-Year-Old Living in The USA

How to open a savings account?

Whether you are considering a high-interest saving account or a traditional savings account, one of the first questions that arise is how can I open an account? To open an account you can visit bank or union credit branches or online.

All you need is your address, name, phone number, and photo identification. There are a few best savings account interest rates that offer taxable earnings for which Social Security Number.

A few institutions will ask you to submit a minimal deposit to open an account, while others won't have such a requirement.

How can someone close a savings account?

Have you accomplished your savings goals or want to turn to other best savings account interest rates? First, you need to close your current savings account. There are 2 ways to close an account:

Visit banks and submit a written request form for cancellation
Close the account over the phone

In both methods, you will ask for your identity information.

Bottom Line

High-interest savings accounts are one of the ideal methods to save and earn interest from your money. This account provides a higher interest rate than a checking account while still allowing you to withdraw money easily. Though, it may provide you with lower interest rates than investment options but in the end, you have your money secured and safe.

Frequently Asked Questions

Q.1 Which savings account is considered best?

Ans. Along with High-interest savings accounts, accessibility to funds and lesser monthly maintenance fees can be considered ideal options while shopping various financial saving products. In addition, a savings account with higher APYs can be the best alternative at online banks or credit unions if visiting the branch isn’t your concern.

Q.2 Is a savings account considered an asset?

Ans. An asset is something that will bring you positive value, whereas a savings account falls under the hope that it will bring a positive balance. Savings accounts are liquid assets that are easy to convert into cash.

The Smart Saver’s Guide: Ins and Outs of Saving Accounts and Interest Rates