Do You Have The Right Savings Account?

You work hard for your money and you work hard to put that money somewhere where it can grow and make you money. From young we’ve been told we should sock away money every payday into a savings account. But do you have the right savings account?

Most of us have some type of savings account, but surprisingly many do not really know how their savings account works, what the interest rate paid is, and what the fees charged are.

If your luck you’ve never seen what’s called the dwindling balance syndrome. It means you are smarter than the rest of us. How many times have you opened your savings account statement to see that the interest paid was actually less than the fees charged resulting in a balance that was less than it was at the beginning of the month? This obviously is not smart savings! And it means you’ve probably got the wrong account!

There are several factors that determine what the interest rate being paid will be. Different accounts offer different interest rate structures and so do different banks so it pays to shop around. It might help to understand the basic differences among savings accounts.

Of course the main purpose of a savings account is to save money for a rainy day, a vacation, or your retirement. The reason you put your money in a savings account is so that it will make money by earning interest, otherwise you might as well put it under your mattress.

The interest rate your bank pays you for leaving your money in their bank can depend a great deal on the type of savings accounts. Some accounts have what’s called a tiered interest rate. So for example under $5000 you earn 1%, over $5000, your rate increases to 1/%, and over $10,000 they reward you with a 2% rate.

Interest rates can also differ from bank to bank. Some banks will offer more competitive rates in an effort to pull new customers. Online banking institutes that have only virtual locations often offer a percentage point or more over traditional banks. After all their operating costs are much less.

Most savings accounts restrict the number of withdrawals you can make without being penalized. These are normally quite small, usually under 6 a month. Each withdrawal you make after that will cost you a fee. Rather like being fined for spending that money.

But don’t be too quick to blame your bank for this system. It’s actually mandated by the government who in their infinite wisdom decided this was an excellent way to insure people were not abusing the higher interest rates attached to savings accounts. It was also done to encourage you to save for your retirement years.

Some savings accounts have a minimum deposit required just to open them, some require a minimum balance be maintained, and some require your funds to stay in place for a specific period of time, such as 90 days. Before you open your account make sure you understand all the elements of it.

Just like any other purchase we make as a consumer, you should be sure to shop around when looking to open a savings account. Then you should take some time to compare what each bank has to offer. These days you can quickly do your research online.

Once you’ve found the right savings account you’re ready to open it and make your first deposit and get busy saving for that rainy day!

Deon Melchior is the Editor and Publisher of Article Click. For more FREE articles for your ezine and websites visit ArticleClick.com. Article Click is a free content article directory. This means that as a publisher you may reprint the articles that are included in our site, as long as the article is unedited and the author box is included with it's live hyperlinks.