Banks will pay you to store your money with them. They will give you a percentage of the amount in your savings account. The higher the interest rate, the more money you earn each month. Checking accounts might also generate interest, but the best savings account rates are double or triple the amount.
For example, a checking account could have 0.06 percent while the corresponding savings account rate could be 0.25 percent. With $1,00 in each account:
- The checking account would generate $0.05 a month or $0.60 a year.
- The savings account would generate $0.21 a month or $2.50 a year.
The highest savings account rates are around 0.5 to 0.6 percent. Your high-interest savings account would earn you $5.50 annually.
Less than $10 a year might not sound like big winnings now, but you will build up your savings account for years to come. Saving an additional $150 to your initial $1,000 deposit could result in about $4,630 after two years in a high-yield savings account.
Some of the best savings interest rates are associated with accounts with high minimum balance requirements. BankDirect, for example, requires a minimum balance of $10,000 for its 0.6 annual percentage yield (APY). At the end of the first year, the account would have a balance of $10,060.17.
One of the best online savings account organizations is Ally Bank. Their accounts have high-interest rates and have no monthly maintenance fees.
If you want the best savings interest rates but need the freedom of a checking account, a money market account might be your best solution.