Is Your Money in the Right Savings Account? Here’s How to Know

Finding the best home for your money is important.

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Important points

• Savings accounts protect your main deposits and give you easy access to your money.
• If you’ve had the same account for a long time, it might be worth seeing what other options there are.

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Savings accounts are a great place to keep money you’ve earmarked for emergencies. Why is this? The deposits you make into your account cannot lose value, while investing in a brokerage account puts you at risk of your account balance declining from one day, week or month to the next.

Not only are your principal deposits guaranteed in a savings account (up to $250,000 per depositor), but you can access that money at any time. Want to withdraw $1,000 to go on vacation? That’s your decision. Do you need $2,000 to pay a home repair technician? The money could be in your hand the same day.

But if you’ve had the same savings account for a while, it may be a good idea to explore other options. You never know when there might be a better place to put your money.

Is your savings account the most generous on the market?

For many years, savings accounts paid so little interest that it was almost not worth worrying about whether or not you were getting the best rate. But these days, savings accounts are starting to pay a lot more interest than they used to.

If you’ve been following the news, you may have read that the Federal Reserve has aggressively raised interest rates to slow the pace of inflation and give consumers some much-needed relief. The downside is that loans are already getting more expensive. Consumers looking to take out auto loans, mortgages or personal loans in the coming months could easily be stuck with higher lending rates due to the Fed’s actions.

But the positive side of the Fed’s rate hikes is that savings accounts and certificates of deposit are now paying more interest. Therefore, it’s important to take advantage of higher interest rates by finding a savings account that pays you more generously.

In fact, figuring out if it’s worth moving your money is easy. If your bank pays 1.1% interest on your savings but another bank pays 1.6%, then a switch might make sense. Finally, if you want to save money, you can also earn as much interest as you can.

Nowadays, it is particularly worth taking a look at the interest rates that online banks pay. Because online banks don’t have the same operating costs and overheads as traditional banks, they can often offer consumers higher interest rates on their savings.

Don’t be afraid to change something

Change can be tough. If you’ve been with the same bank for a long time, you might be reluctant to transfer your money. But if you see a much higher interest rate elsewhere, then it’s worth making the change.

Another option is to hold a small amount of money at your current bank but transfer most of your savings to another bank to take advantage of higher interest rates. As it stands, the interest you earn in a savings account might pale in comparison to the return you could earn by investing in a brokerage account. But you need the security of a savings account for your emergency money. However, that doesn’t mean that you shouldn’t do everything you can to get as much interest as possible.