Savings Accounts: All About Choosing and Maintaining (2024)

FAQs

How do you choose a savings account? ›

A savings account is a good place to keep money for a later date, separate from everyday spending cash, because it offers safety, liquidity and interest-earning potential for your funds. These accounts are a great place for your emergency fund or savings for shorter-term goals, such as a vacation or home repair.

The short answer to this question is yes, high-yield savings accounts are still worth opening today. But that answer could change in the months to come. That being said, high-yield savings accounts are generally still worth opening for all of the following reasons.

Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.

It's Low-Risk

In many investments, you'll lose money over the course of individual days, weeks, months or even years. But with a savings account, your balance won't go down. It will only go up. (That is, until you take money out, of course.)

Savings account benefits include safety for your savings, interest earnings and easy access to your money. However, savings accounts may have drawbacks, such as variable interest rates, minimum balance requirements and fees.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What is the safest place to keep a savings account? ›

This model suggests allocating 50% of your income to essential expenses, 15% to retirement savings and 5% to an emergency fund. This plan allows you to meet your immediate needs and plan for the future before you spend on anything else.

Which savings account is best? The best savings accounts pay high interest rates, charge few fees and provide the accessibility you need. A savings account with an excellent APY at an online bank or credit union may be the best option for you if you don't mind forgoing branch banking.

Because it usually provides interest, allows for easy withdrawals, and is insured, a savings account is most useful for money that you would need in the near future. This makes savings accounts ideal for emergency funds and your large purchase goals.

Choosing a savings account is an important financial decision that can help people achieve their financial goals. Banks offer customers a variety of options when it comes to savings accounts. This lesson focuses on the following three types of savings accounts: traditional, money market, and certificate of deposit.

Interest rate: The interest rate is often the headline-grabber. Some accounts may lure you in with bonus rates, so it's wise to scrutinize their duration and any strings attached, such as minimum regular savings. Interest might be fixed for a set term or variable as the market changes.