How to Compare Savings Accounts

People open savings accounts because they want to put cash away for future use in case of emergencies, travel and other things they want in life. Savings accounts are safe places to tuck your cash because they are FDIC insured, and offer a place for moderate growth of your wealth.

Instructions

Difficulty: Moderately Easy

1. Decide what your needs and goals are. Use these to determine the type of account you want to open. Some options include regular savings, tax-free savings, term or bond accounts.
2. Check the interest rates. Usually you will want to look for the highest interest rate possible.
3. Determine how convenient and accessible you want your account to be. The phone and Internet have made it easier to access your accounts. Long-term savings accounts offer notices on withdrawals, and also feature less temptation to take money out and better interest rates. If you want your money right away, though, go for an instant access savings account.
4. Research the differences between available accounts. Consider the minimum and maximum deposit levels, balance requirements, penalties for withdrawal, fees for transferring money to other account and service charges.
5. Shop around to compare accounts. Look for posted interest rates on the Internet and in financial magazines. Use online banking calculators to help compare savings accounts.
6. Understand the stability of rates for the account. A promotional rate is good for a certain time for first-time account holders. There is no guarantee that a rate will not fall after you open the account. Graduated rates offer higher returns on larger accounts of money and lower when your account balance goes down.

Tips & Warnings

• Have a mix of savings accounts. Choose long-term savings and emergency fund savings.
• With a regular or personal savings account you save as little (or as much) as you want. These give you easy access to your account. Some have cash cards so you can withdraw when you want to. They rarely offer the best interest rates, but have no or low minimum balance requirements.
• A money market account pays more interest, usually requires a higher initial investment and offers limited withdrawals. Money market accounts are administered by brokers and other financial firms, not banks, and they are not FDIC insured.
• With a CD (certificate of deposit), you leave your money in for a certain amount of time. Usually the longer the life of the CD, the more interest you will get. They are less accessible than a money market or regular savings account.
• Savings Bonds issued by the U.S. government have a maturity date of 20 to 30 years. They are less accessible than a regular savings account.