How to choose the best savings account

September 19, 2018
Savings accounts are often an afterthought. People simply choose whatever savings account the bank offers them when they open a checking account. Some may forego the savings account altogether. That approach is unfortunate because savings accounts are the first step in building wealth. Variables such as fees, money transfer methods, and interest rates can make a big difference in how efficient you are at building your savings and creating wealth.
How to choose the best savings account

Here are some things you should look for when choosing a savings account. 

Easy transfers

You will want to make it as easy as possible to deposit money into your savings account. There are a couple of options for doing this. If possible, you should avoid savings accounts that require you to make deposits in person at a branch location. Instead, look for savings accounts that let you either transfer money from a checking account online or automatically transfer money to your savings account from a checking account at a set time each month. 

What is the interest rate?

Interest rates can matter when it comes to savings accounts. Unlike credit card or loan interest rates, savings account interest rates are paid by the bank to you (as a kind of fee for keeping your money there). Interest rates are generally modest, but they will bring you some extra cash with absolutely no effort on your part. 

You should be aware of any rules attached to these interest rates. Some banks will require you to deposit a certain amount before you start earning interest. Others may have a tiered interest rate system, with top interest rate tiers requiring you to deposit a significant amount of money. You need to read the fine print, especially if the rate is much higher than the rates offered by other banks. Often, you need to deposit a huge amount of money to get that rate. 

The best savings accounts will give you a good rate regardless of how much money you put in. 

Avoid fees

Your savings account should not come with fees. Be wary of penalties for taking your money out of the account or for having a balance that falls below some certain minimum. It is better to find a savings account with a lower interest rate instead of one that could hit you with fees. 

How to keep your money in your savings no matter what

The biggest thing to remember for all savings accounts is that they provide the most benefit when you keep your money in them without withdrawing it. It can be tempting to make a withdrawal if you are confronted with an unforeseen expense. However, you should not do this. Instead of taking money out of your savings, you can consider getting an online personal loan to meet the costs. You can get the loan with a pay stub and bank statement and then pay if off using subsequent pay cheques. If you do this, you will not have to touch your savings and it will remain in your bank drawing interest.