When you earn money, you’ll need to find a safe place to keep it. While you could take the old-fashioned approach of stashing it under your mattress, that wouldn’t be smart for several reasons. Not only is your money not secure there, but it’s also not working for you. Instead, placing your funds in a savings account allows you to earn interest, enjoy the convenience of linking your savings to other accounts, and feel assured knowing that your money is safe.
What kind of savings account should you look for? There are several factors that can influence your decision, including security, convenience, and interest.
Security
The good news is that any reputable bank will be FDIC insured, which means that your money will be secure. FDIC stands for Federal Deposit Insurance Corporation, and it guarantees that up to $250,000 of your money will be protected. If you have more than that amount to place in savings, you’re welcome to open more than one account. While it’s extremely unlikely that a bank will collapse, if it were to happen, the FDIC program would make sure that you didn’t lose your funds.
Convenience
Convenience is an important factor when deciding where to place your money. There are two main types of savings accounts: online accounts and traditional savings accounts at brick-and-mortar banks. Traditional savings accounts are those with physical branches, such as the ones that you likely have in your community. In fact, you probably have a number of banks in your vicinity. Some are part of nationwide networks, while others are regional. If you ever need to deposit or withdraw money, you can stop by a traditional bank during their business hours to speak with a teller. Outside of business hours, you should be able to use the ATM. Also note that many traditional banks have online services and representatives who are available for extended hours, some of which may be in the evening and on the weekends.
In contrast, online banks operate without a physical presence. They’ve become more popular in recent years and have done well, thanks to modern technology. Like their traditional counterparts, they’re FDIC insured, so your money can stay safe. While they don’t have representatives who you can speak with in a face-to-face meeting, they still have staff members who answer phone calls, respond to emails, and chat with customers online. In addition, many of these online banks focus on customer service and have tried to enhance the customer experience. They usually offer user-friendly mobile apps and websites that allow you to perform banking transactions and check your statements 24 hours a day. You’ll be able to use your mobile device to deposit checks, transfer funds between different accounts, and more. These banks can issue ATM cards so that you can withdraw cash at any ATM. Some even cover ATM fees and/or partner with other companies to provide free access to ATMs.
In regards to online banks, one of the downsides in terms of convenience has to do with cash deposits. These banks might not accept cash deposits because they don’t have their own ATMs that can accept bills. To get around this, you may have to open up another account at a brick-and-mortar establishment. You’d then be able to deposit your cash at a local branch and then transfer it to your online bank. This inconvenience could make online banks less favorable to those who regularly deposit cash. However, not too many people find themselves in this situation any more, given the rising popularity of online peer-to-peer transfers and direct deposit.
Interest Rates
If you’d like to put your money to work, you’ll have to consider interest rates when searching for a savings account. Every savings account comes with an interest rate, but those rates could be close to zero percent in some cases. Some of the largest brick-and-mortar banks offer very little interest with their savings accounts. In comparison, online banks tend to offer much higher interest rates. Those numbers could be around four or five percent, or even higher. Whether you have a few hundred dollars or a few hundred thousand dollars, every dollar and cent matters. Instead of parking your money in a place where it won’t grow, you could be giving yourself the opportunity to make some income off of your investments.
Keep in mind that interest rates fluctuate with market changes. In our current climate, traditional savings accounts tend to come with very low interest rates. If significant economic changes come about, then this discussion may be different in a few years.
Other Factors
Savings account, for the most part, don’t require long-term commitments. You can make the best financial decision right now, and if circumstances change in the future, you likely won’t face any penalties for taking your money out of one bank and opening up a different savings account.
Remember that banks want customers and need to raise money so that they can lend it out and/or invest it. Banks will be competing for your business, trying to attract you and retain you as a customer. The decision is in your hands.
Before making any sort of decision regarding a savings account, read the fine print. Some accounts require minimum account balances, some have fees associated with them, and others may place restrictions on ATM withdrawals and account transfers. In general, online banks will have fewer restrictions, but you’ll need to do your homework in order to gain a full understanding of how a particular savings account works.
Traditional or Online?
To sum things up, traditional and online banks both offer security. Traditional banks may be more convenient to some customers, whereas online banks can attract attention with their minimal restrictions and higher interest rates. What are your expectations regarding how you will use your savings account? You’ll have to think about the answer to this question when figuring out what type of savings account will be the right choice.
Tips:
When deciding whether to place your money in a particular savings account:
- Look for its interest rate
- Check if there are any minimums
- See whether there are maintenance, transaction, and/or ATM fees
- Find out if there are monthly transaction limits
- Research the customer service support system
When you earn money, you’ll need to find a safe place to keep it. While you could take the old-fashioned approach of stashing it under your mattress, that wouldn’t be smart for several reasons. Not only is your money not secure there, but it’s also not working for you. Instead, placing your funds in a savings account allows you to earn interest, enjoy the convenience of linking your savings to other accounts, and feel assured knowing that your money is safe.
What kind of savings account should you look for? There are several factors that can influence your decision, including security, convenience, and interest.
Security
The good news is that any reputable bank will be FDIC insured, which means that your money will be secure. FDIC stands for Federal Deposit Insurance Corporation, and it guarantees that up to $250,000 of your money will be protected. If you have more than that amount to place in savings, you’re welcome to open more than one account. While it’s extremely unlikely that a bank will collapse, if it were to happen, the FDIC program would make sure that you didn’t lose your funds.
Convenience
Convenience is an important factor when deciding where to place your money. There are two main types of savings accounts: online accounts and traditional savings accounts at brick-and-mortar banks. Traditional savings accounts are those with physical branches, such as the ones that you likely have in your community. In fact, you probably have a number of banks in your vicinity. Some are part of nationwide networks, while others are regional. If you ever need to deposit or withdraw money, you can stop by a traditional bank during their business hours to speak with a teller. Outside of business hours, you should be able to use the ATM. Also note that many traditional banks have online services and representatives who are available for extended hours, some of which may be in the evening and on the weekends.
In contrast, online banks operate without a physical presence. They’ve become more popular in recent years and have done well, thanks to modern technology. Like their traditional counterparts, they’re FDIC insured, so your money can stay safe. While they don’t have representatives who you can speak with in a face-to-face meeting, they still have staff members who answer phone calls, respond to emails, and chat with customers online. In addition, many of these online banks focus on customer service and have tried to enhance the customer experience. They usually offer user-friendly mobile apps and websites that allow you to perform banking transactions and check your statements 24 hours a day. You’ll be able to use your mobile device to deposit checks, transfer funds between different accounts, and more. These banks can issue ATM cards so that you can withdraw cash at any ATM. Some even cover ATM fees and/or partner with other companies to provide free access to ATMs.
In regards to online banks, one of the downsides in terms of convenience has to do with cash deposits. These banks might not accept cash deposits because they don’t have their own ATMs that can accept bills. To get around this, you may have to open up another account at a brick-and-mortar establishment. You’d then be able to deposit your cash at a local branch and then transfer it to your online bank. This inconvenience could make online banks less favorable to those who regularly deposit cash. However, not too many people find themselves in this situation any more, given the rising popularity of online peer-to-peer transfers and direct deposit.
Interest Rates
If you’d like to put your money to work, you’ll have to consider interest rates when searching for a savings account. Every savings account comes with an interest rate, but those rates could be close to zero percent in some cases. Some of the largest brick-and-mortar banks offer very little interest with their savings accounts. In comparison, online banks tend to offer much higher interest rates. Those numbers could be around four or five percent, or even higher. Whether you have a few hundred dollars or a few hundred thousand dollars, every dollar and cent matters. Instead of parking your money in a place where it won’t grow, you could be giving yourself the opportunity to make some income off of your investments.
Keep in mind that interest rates fluctuate with market changes. In our current climate, traditional savings accounts tend to come with very low interest rates. If significant economic changes come about, then this discussion may be different in a few years.
Other Factors
Savings account, for the most part, don’t require long-term commitments. You can make the best financial decision right now, and if circumstances change in the future, you likely won’t face any penalties for taking your money out of one bank and opening up a different savings account.
Remember that banks want customers and need to raise money so that they can lend it out and/or invest it. Banks will be competing for your business, trying to attract you and retain you as a customer. The decision is in your hands.
Before making any sort of decision regarding a savings account, read the fine print. Some accounts require minimum account balances, some have fees associated with them, and others may place restrictions on ATM withdrawals and account transfers. In general, online banks will have fewer restrictions, but you’ll need to do your homework in order to gain a full understanding of how a particular savings account works.
Traditional or Online?
To sum things up, traditional and online banks both offer security. Traditional banks may be more convenient to some customers, whereas online banks can attract attention with their minimal restrictions and higher interest rates. What are your expectations regarding how you will use your savings account? You’ll have to think about the answer to this question when figuring out what type of savings account will be the right choice.
Tips:
When deciding whether to place your money in a particular savings account:
- Look for its interest rate
- Check if there are any minimums
- See whether there are maintenance, transaction, and/or ATM fees
- Find out if there are monthly transaction limits
- Research the customer service support system
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