Saving money in banks has never been this great. After the 2008 financial crisis, the federal government has increased depositor insurance to $250,000. While it’s good to have some money saved up in the bank, as it’s safer there, there are certain costs related to it.
Basic saving bank account provides minimal interest of not more than 1 percent annually. In exchange, you get easy access to your money. In addition to very low interest rates, banks also charge hefty fees when balance is below the minimum. Also, inflation could dwindle your savings as the annual rise in prices outpaces the annual interest you earn. Despite all these, banking is a very convenient way to save. You can use your debit card to make purchases, get money out from any ATM, and do online banking.
If you want to save your money in a bank and maximize its growth at the same time, the best option you have is to invest in certificate of deposit or CD. With a CD, your money is locked up for six months to a few years. CDs come in three types: stock-indexed (tied to stock), callable (long-term, high rates), and global (tied to currency). If you don’t mind having your money inaccessible for some time, then getting a CD is a good savings option for you.
However, if you are decided to open a savings account but want to earn higher than what banks offer, you have three options. First, you can open money market account, which provides high yield. The catch is that this account is tied to federal market indicators, which may not always work in your best interest.
The second saving account option is an online savings account. Because this account is only operated online, banks don’t charge you for overhead that standard banks do, so you end up earning more in interest.
The third and final option is to save money with credit unions. Credit unions are like banks, only they are owned by depositors. Credit unions always offer higher yield than banks do, plus they usually provide profit sharing benefits.