Over the last decade, annual returns on savings accounts have plummeted. The average savings account offers an annual percentage yield APY of only .08%, according to the Federal Deposit Insurance Corp (FDIC). Some traditional banks offer APYs as low as .01%.
Is it still worth keeping your money in a savings account that earns as much interest as your childhood piggy bank?
Some online banks can often offer savings accounts with as much as 2% APY and when they’re backed by the FDIC, your savings are just as protected as in any traditional bank.
Maximize Interest With A High-yield Savings Account
Because online banks have less overhead without physical locations and human tellers, they can pass along their savings to their customers.
While 2% APY still might not sound like much, interest will start accumulating over time. When you deposit $1,000 into an account with a 2% APY, at the end of the year you earn $20 for a total of $1,020. Grow the account over time, little by little, and you’ll see the difference start to add up. Your money will do more to keep up with inflation than if you left it in a checking account.
Convenient Access For Short-term Savings Goals
If you’re putting away money for a vacation or an emergency fund, savings accounts might be the right choice. Money market funds fluctuate with the market and might lose money in the short term even as they accrue value long term. Certificates of deposits (CD’s) often offer higher interest rates, but will hold your money for a specified period of time — or you’ll lose the interest.
Savings accounts are the more liquid option, with instant access to your money if you need to make withdrawals or move it between accounts. Due to FDIC regulations, savings accounts limit you to six transactions a month, which includes automatic or preauthorized transfers, bill payments, debit card payments or any other recurring transfers. But you can make unlimited ATM withdrawals to access cash when you need it.
Savings accounts are also a useful psychological tool. Saving is no easy task, and it helps to set money aside in a separate fund and makes it harder to spend it.
Avoid Hidden Fees And Surcharges
High fees can quickly cancel out the accumulation of interest. Some savings accounts charge a monthly maintenance fee, account minimum fees or an ATM fee for withdrawals out of their ATM network. Other banks require a certain minimum balance to open an account or earn a higher APY. By shopping around and comparing options, you can find the best high yield savings account with the highest annual return.
Search tools like Fiona are helpful in evaluating differences between savings accounts. You can filter offers by deposit amount and location to find the one that best fits your financial needs. The platform allows users to compare APYs and fees between offers and even open an account in a couple of minutes if you see one that interests you.
Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.