Wisely Selecting a Savings Account

In mid-November, Charles wrote a fantastic post addressing how to decide between paying down debt or saving. His bottom line: your debt interest rate will always be higher than your savings account APY, so pay down your debt.

But, what if your debt is under control? Below I highlight some key metrics to analyze when selecting a savings account, in addition to showcasing some of the best savings accounts on the market!

Average Percent Yield (APY) is the amount you earn yearly from the deposit. This percentage is critical because it is a compounding rate of return or the earnings on your earnings. According to FindThBest’s database, the average APY is .16%. Look for an APY as close to 1% in order to maximize your return on investment.

Money Market or Regular Savings? Since you’ve already completed step one of this two-step process, (paying down your debt) I recommend opening a money market account over a regular savings account. Money market accounts allow your money to grow at a far faster rate than a regular savings account because you are allowing the bank to invest the money.

How does a money market account work? These accounts offer higher than normal APYs because they involve risk. However, the risk is exactly what’s going to get you paid. The bank can invest the money you place in the account in government and corporate securities. Ideally, these investments make money and you reap the returns because you forked up the investment.

Go Internet. In order to effectively save I highly recommend setting up direct deposit. You can’t miss money you never see. The reason people traditionally prefer branch banks is because they offer services, such as ATMs and branch locations. Internet banks don’t incur these costs they can pass the savings along to you, the consumer. Plus, direct deposit eliminates most bank visits.

The Best Savings Accounts

At the end of the day, informed decisions are better decisions. Make sure to analyze the additional services a bank provides, as well as monthly fees associated with the specific account. Here are three savings accounts to consider when shopping around:

Byline: Post provided by Kyle Espinola of FindTheBest, an unbiased, data-driven platform designed to help you find the best credit card, credit union, and much more!