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How to Choose the Right Savings Account

How to Choose the Right Savings Account

Jenius Bank Team6/8/2023 • Updated 10/9/2024
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Choosing the right savings account may make a major difference in achieving your financial goals. Whether you’re looking for a place to keep your emergency fund, save money for a major purchase, or just keep your cash secure, a savings account is often a great option. These accounts are offered by most financial institutions, online banks and neobanks alike.But choosing a savings account isn’t as easy as picking the first one you find. There are a few things to keep in mind as you compare your options and determine which one could help maximize your money and meet your financial goals.Let’s look at how to choose the best savings account for your needs.

Key Takeaways 

  • There are several features to consider when comparing savings accounts, such as rates, access, fees and more.
  • Selecting an account with higher rates may allow you to earn more interest over time, which could help you reach your financial goals faster.
  • Beware of hidden fees or institutions that don’t have deposit insurance.

Savings Account Shopping List 

As you embark on your journey to choose a savings account, you have several factors to consider and compare between banks, including security, rates, access to your money, and fees. Let’s dig into each of these factors a little more.  

1. FDIC Insurance

When choosing an account, you want to make sure that your money is going to be safe. One of the best ways to protect your funds is by choosing an FDIC-insured bank or NCUA-insured credit union. FDIC insurance and NCUA insurance protect up to $250,000 of your funds per depositor, per account type, per institution.Note that deposit insurance is only available through chartered institutions who are monitored by banking regulators on an ongoing basis. The rise in neobanks (fintech companies that offer banking services) has added some additional options for savings account shoppers. But these companies are not chartered institutions and can’t offer deposit insurance on their own. Some neobanks choose to partner with chartered banks to protect their customer deposits, but not all of them do. Be sure to do your due diligence!

2. Competitive Annual Percentage Yields (APYs)

Savings accounts pay interest on your deposits which could help you grow your savings faster over time. The amount of interest you earn depends on the Annual Percentage Yield (APY) offered on the account. The APY includes the rate itself plus the compounding of that interest over a 12-month period.Choosing an account with a competitive APY could help reduce anxiety you may have around your finances. Our recent Mind-Money Connection study found that around 31% of millennials feel behind their peers when it comes to saving and investing. Taking advantage of high savings rates could help you catch up (or even get ahead!)

Compound Interest

As a reminder, compounding interest includes the interest you earn on the principal as well as previously earned interest. This creates the potential for exponential growth of your money.

HYSAs

According to the FDIC, the national average APY was 0.46% as of April 15, 2024.1 But high-yield savings accounts (HYSA) typically offer much higher rates. Some banks offer rates at 5.00% APY or higher.2HYSAs are often found at digital banks because they lack the overhead of a physical branch network, and they’re able to pass the overhead savings on to customers in the form of higher rates.Just remember that these rates fluctuate over time, so it’s important to pay attention to your account.

Savings Rate Watch Outs

Some institutions offer tiered rates depending on your account balance or bonus offers for depositing certain amounts within a specified time period. Be sure to watch for these situations and read the fine print to make sure you’re getting the best rate on your savings or meeting the requirements to earn a bonus.

3. Easy Access to Your Money 

Your savings account is your money, so of course, easy access to your funds is important. Consider how you want to access your money before you pick an account. Savings accounts through banks with physical branches are often accessible online as well as in-person by visiting your local branch. Digital banks often offer quick online transfers between institutions, but you won’t be able to visit a teller in a branch. Be mindful of transfer fees and withdrawal limits on each account you consider. Believe it or not, these restrictions used to be set by the government, and they still vary by institution. Prior to April 2020, the Federal Reserve Board limited certain withdrawals from savings accounts to six per month via Regulation D. Regulation D was removed in April 2020, but some banks continue to enforce this limit, so do your homework.3

4. Low Fees and Flexible Account Requirements 

Before opening an account, check the fine print for any fees or requirements that come with the savings account. Some common examples include:
  • Minimum balance requirements. When your balance dips below a certain level, some banks may charge a fee.
  • Transfer or withdrawal limits. Some banks cap the number of transfers or withdrawals you may make in a month. If you exceed those limits, the bank may charge you a fee.
  • Monthly maintenance fees: Some banks charge fees just for letting you have an account. Those fees could really eat into your savings.
These fees and requirements are becoming less common in the marketplace—several digital banks are leading the way as fee-free institutions (hint: Jenius Bank). This is putting pressure on traditional banks to adjust their policies. So again, be sure to pay attention to the details when you open a new account.

5. The Types of Accounts They Offer

There’s more than one type of savings account that you could use to build your wealth and achieve true financial wellness. But not all banks and financial institutions offer the same types of savings accounts. As you start comparing your options, consider how different savings account types could help you reach your financial goals. For example, if you want your money to be easily accessible and still at a market-leading rate, a HYSA may be a good fit. But if you seek to maximize your rate over a set period of time, and don’t need to touch your money, a certificate of deposit (CD) account could be an attractive choice.  

Final Thoughts 

With all the factors to consider, savings account shopping may feel complex. Hopefully the tips in this article will help guide you as you research your options. Take time to explore and compare accounts to ensure you’re making the right choice for you. And don’t forget to check out Jenius Savings in the process!
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