When you start building a savings account, there are a few options to consider. Is it a short-term savings account, for something like a vacation or a special purchase? Or is it longer term, for emergencies only?
One question that also needs to be considered is whether you will put your money into a high yield savings account. Given that we’re in a low interest rate environment, it’s hard to find savings accounts with high interest rates. This means it's hard to find savings accounts that reward you for parking your money in them. Since the Great Recession in 2008, interest rates have been kept incredibly low to give the economy a chance to grow. While that’s good news if you have a lot of debt, it’s not exactly the most helpful incentive when it comes to putting away extra cash.
There are, thankfully, a few options out there that offer interest of over 0.5% (and yes, we know that’s crazy tiny!). These are called high yield savings accounts. A high yield savings account has an interest rate higher than many other savings programs, giving you an incentive for putting away extra cash.
We recommend this website a lot, but NerdWallet is your best bet to find a high yield savings account that works for you.
I happen to use the option listed on NerdWallet with the lowest yield, just so I can keep my banking in the same place. Capital One 360 offers savings accounts with 0.75% annual percentage yield. I’m making a very small amount of money on my savings, but it is better than nothing. This bank is also great because you can open multiple savings accounts. I have one for emergencies and one for vacations, for example.
The best options offered come from Goldman Sachs, which has a 1.2% interest rate for savings accounts. Though it’s a big bank, it’s totally free to park your money here, and the bank offers no transaction fees. If you prefer a credit union to a big bank, you can get a 1.05% rate with Alliant Credit Union. You can join with a $10 charitable donation if you don’t meet membership criteria. You also must have at least $100 deposited.
- Alicia McElhaney / She Spends Issue #8