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You know how to save, so why are the numbers in your accounts always so disappointingly low? If your savings are growing at a snail’s pace, you may not be doing anything wrong. And you are not alone. About 45 percent of Americans could not handle a $1,000 emergency without using credit.
It may be time to stop trying to simply squirrel away a little bit of your monthly earnings in a simple account. What successful savers know are certain secrets that make your savings grow – WIthout forcing you to cut back on anything else (Because for many Americans, there isn’t much left to cut back on). Here is a look at 7 of our favorites.
Money Market Accounts
Money market accounts (MMAs) blend the best of checking and savings accounts to give you the freedom to use your savings when you need to while earning some pretty impressive interest rates at the same time.
With these accounts, you can usually complete debit transactions or write checks, while also earning a high interest rate. Compare, for example, the 0.01% rate of a traditional savings account to the average 0.64% of an MMA.
While MMAs are better than regular savings accounts because of the higher interest rate and the flexibility of withdrawals, you do have to be aware of certain drawbacks. For example, your check-writing privileges may be more limited than with a checking account. Plus, they usually come with
- Fees for balances below the minimum
- Limited monthly transactions
Overall, money market accounts can be an excellent option for those looking to earn a better return on their liquid savings while maintaining some flexibility and security.
High-Yield Savings Accounts
Not all savings accounts restrict your interest to tiny amounts per year. High-yield savings accounts deliver much higher interest rates (Higher even than MMAs), while giving you all the advantages of traditional savings accounts.
You could earn up to 5% interest annually on your savings. That is the difference between $50 and $500 in interest in one year based on a $10,000 deposit.
High-yield savings accounts can also make it easier to handle your savings by reducing or eliminating minimum balance requirements and monthly fees. Expect to find these types of accounts at online banks and credit unions, whose lower operational costs allow them to eliminate monthly fees and minimum balances. Other advantages include the following:
- Ability to open multiple high-yield savings accounts
- Ability to organize savings for specific goals
- Automated transfers from checking accounts
Overall, High-Yield Savings accounts offer a practical, low-risk way to grow your savings faster while benefiting from fewer fees and useful features.
High-Yield Checking Accounts
High-yield checking accounts give you the privileges of a regular checking account and the benefits of a healthy interest rate. You won’t be reaching high-yield savings account rates (The average is about .08 percent), but you will earn more than if you stuck your money in a regular savings account or a regular checking account.
Be aware that these accounts often require you to maintain a monthly activity level or deposit number on the account in order to earn your interest rates. Not meeting those levels could also earn you fees. However, these accounts can also give you
- Unlimited transactions
- Direct deposit and online banking
- Instant funds access
- Check-writing and debit card abilities
Certificates of Deposit
If you are willing to wait a little while to withdraw your money, you could opt for a CD (Certificate of Deposit). Certificates of Deposit are time deposit accounts that offer a fixed interest rate for a specified term. Unlike traditional savings accounts, CDs require you to leave your money untouched for the duration of the term, which ranges from a few months to several years.
The longer the term of your CD, the higher the rate you enjoy. However, even just putting your money in one for a few months this fall could help you to earn enough savings to go on a vacation, pay down some debt, or reach other financial goals.
One major benefit of CDs is the guaranteed return. The interest rate is fixed, so you always know exactly how much money your savings will earn you. This makes CDs an excellent choice for those looking to save for specific financial goals without risking their principal.
However, CDs come with drawbacks. Early withdrawal penalties can be significant, making it important for you to only put away money you know you will not need for several months. Additionally, the fixed interest rate may not keep up with inflation over longer periods.
Switch Banks for Higher Interest Rates
Don’t just choose the right accounts for your savings. Choose the right banks, too. Interest rates can vary from bank to bank, so shopping around could help you find higher rates that help you grow your savings faster.
Take the time to compare different banks and their offerings. Many financial institutions now provide easy-to-use online tools that allow you to compare interest rates and account features, making the process straightforward. By doing so, you can ensure that your money is working as hard as possible for you.
Choose a Credit Card With Rewards
Your credit card could also help you save (Hear us out on this). Credit cards with high cash-back rewards can help you earn money every time you use the credit card by giving you a percentage of your purchase back. If you save the cash back, you can grow your savings without spending any of your own money.
Just make sure that you use your credit cards responsibly, including paying them off in full every month. High-interest credit card debt will suck your savings away, no matter how much cash back you receive. Savvy use of your cards, though, can help you store up for your future.
Shop Around for Better Insurance Rates
Insurance rates often go up – So don’t assume you have the lowest rates. If you can lower your monthly premiums, you can take the extra cash and put it away in your savings accounts.
The process can take some time, but can be well worth it. Shop around to different insurance companies to see which one offers the best rates for the same insurance you have now.
Plus, consider increasing your deductible for your insurance plans. Sometimes, a higher deductible can leave you with a lower premium. Just make sure you can handle paying the deductible if you ever need to.
Ready to uncover the secrets to boosting your savings this fall? Discover how Bank of South Texas can help you achieve your financial goals with ease and efficiency. With over 30 years of serving the Rio Grande Valley community, we offer tailored financial solutions backed by personalized service and local expertise.