Why You Must Open a Savings Account

By Miguel Dos Anjos 

        Making the Money Work for You:

Money that is just standing is money being wasted. Money needs to be always working for us. In the USA we have an average of 3% inflation a year. Every year if we just save the money under our mattress the money will lose 3% of its buying power by the end of the year in average. For the money to have the same buying power year after year it has to grow at least 3% yearly. This is an inflation percentage average; this year inflation might be 2% and next year it could turn to be 4%. 

Banks are always offering new promotion savings accounts with high yield interest to attract new customers. A great benefit of most savings accounts is that you can take your money out in case you need it at any time, in contrast to a retirement account that will lock your money until you reach age 59 and a half, or a CD (Certificate of Deposit) account that can trap your money for a year or more. Always search for the best deals out there, many times banks will offer you a good deal hoping you end up using them for other services as well, or just letting them use your money (to invest) as they wish while you don’t need it. 

Finding the Best Deal:

At the moment I’m writing this article, April 2019, DCU, Digital Federal Credit Union has an online savings account with 6.17% APY (Annual Percentage Yield), one reason DCU can afford to create a good deal like this one, and other banks can’t is because they are mostly an online bank that do not need to pay for all the costs of having buildings in every location they want to provide theirs business and services. For the account I have with them there is one catch: 6.17% is for the first $1,000, after that the interest drops to .25%. Don’t tell anybody but I just transferred $900 to that account and I intend on not letting it go above $1k. Before reaching $1k I’ll simply make a $50 payment from that account and let it keep growing for another year. Fifty dollars a year is not a whole lot, but for one of my first Passive Income (income that requires minimal work) sources it works great for me. Not to mention that after setting it up I need to do nothing else, but simply collect $5 monthly. I do usually log-in once every other month to all my accounts to see if all is well, which takes me less than a minute.

For the moment another of my favorite savings account is a 360 Money Market savings account with Capital 1, they do allow you to touch the money at any time if you need to, and the interest they provide you is 2% APY. It’s better than most banks that will give you .02% APY (very sad), still 2% is not perfect but, if you have a minimum X amount of money that you do not need, and can afford to leave sitting in the account, Capital 1 from time to time has created offers to open the account and give you a bonus cash deposit/gift. Other very common offer, like from Chase, will provide cash if when you open an specific account with them when they are running the promotion if you set up direct deposit they will give you a cash gift.

In the past I have had a savings account called “Pot of Gold” with Crown Bank. That account provided a 3% APY, sadly this account is no longer offered. Be sure to look for the best savings accounts out there instead of letting your money sit in a regular account that offers .02% APY like most accounts, not to mention fees that they might charge.

Another option you can take a look out there are CD’s (Certificate of Deposit) account. They will take your money, and usually not let you touch it for an amount of time you decide to let them have it, with a higher interest return. Longer the time you let them keep the money, higher the interest they will give you on it. Many times they will let you take your money back in case of an emergency before the set planned time, but you will then; need to pay a penalty, so make sure if you put money in a CD, that that is money you will not need any time soon.

For the most part a high APY savings account is great for you to keep your emergency fund, since it is easy to access it. When searching for a good savings account it may take hours of searching, studying and reading small letters, but once the ideal account is found the rewards are worth it. After finding the perfect account; opening it usually takes about 30 minutes, can be done online most times, and higher the amount you can afford to put in them, higher is the return as well.

             I don't for work for any of the banks I mentioned, I use and have used them because they were good for my specific needs and worked for me. They do not pay me to promote or advertise them. 

Getting Interest on Top of Your Interest:

Another important point is that each month (better if weekly or daily) the interest compounds; meaning that each following month the interest will be a little higher than the previous month, because you get to collect interest on last month’s interest as well.  

                If you have any comments, concerns or ideas, please do share with us in the comments below and we’ll get back to you.