When you contemplate a savings account, what comes to mind? I see safety deposit boxes, teller counters, banking aromas, and cordial customer service representatives. The digital world does not immediately occur to me. Yet, the Internet pervades almost every sphere of our lives, from socializing to shopping, learning to leisure. So, why not savings too?
Online savings accounts are growing in popularity due to their superior rates and lower costs compared to the traditional high-street banks. But why this difference? The absence of physical premises reduces operational costs for online banks. Their lower overheads due to no real estate costs translates to savings, which they gladly pass on to their customers.
Remember, the Internet is primarily a quick data exchange service. Money is just another form of data. Consider your weekly transactions. How many are digital, and how many involve physical cash? Chances are you conduct more transactions digitally, using cards or e-wallets.
Keeping this in mind, let’s explore some things to consider when choosing your ideal savings account:
– Average Percent Yield (APY): This represents your yearly earnings. It’s a compounded rate, implying your money earns more money. When comparing different accounts, realize that a higher APY is better. Aim as close to 1% as possible, when checking out various savings options.
– Money Market or Regular Savings: If you’re serious about saving, consider a money market account. Such accounts can grow your wealth faster by further investing your money. Banks use your funds to buy government and corporate securities. While there’s a bit of risk involved, the returns can be higher. Regular savings accounts certainly offer high APYs, but money market accounts might just pump up your returns faster.
– Avoid: Stay away from accounts with minimum balances and excessive service fees. Numerous accounts offer high APYs without unnecessary charges. Also, don’t divert large amounts of cash toward savings if you’re in debt. The interest on your debt will invariably outpace even the highest APY.
Here are three accounts that reflect what I’ve discussed. That being said, everyone’s needs differ. So do your own research and ask a lot of questions.
