We all need savings accounts. We all need a long term place to store our money for some future moment when need it. However, not all savings accounts are created equal and it’s no secret that typical savings accounts have little to no interest you can earn. It’s depressing.
When opening a checking account, it’s common that account comes bundled with a savings account too. I have 2 savings accounts of this kind (one at Chase and one at Wells Fargo) and both them, despite how much money I’ve had at them at any given point have barely return on any interest. I don’t think I’ve seen an interest payment over 25 cents. It’s depressing.
You’ve probably seen the same thing when looking through your savings account.
Where Can I Get The Best Savings Account
I’ve learned that you’ve got to ditch these big ‘brick & mortar’ banks and sign up with the institutions that are exclusively accessed online. Places like Ally.com – the best savings account I own.
I’ve seen some great returns on the money I’ve put into this account, especially by comparison to my other savings accounts. Of course this is nothing compared to putting that same money into various long-term investment accounts (something to keep in mind).
When deciding where to put your stash of cash, here’s a good rule of thumb to follow:
Will you need the money anytime in the next year?
If you do plan on needing your money in the near future, it’s best to place it in a traditional savings account. You have quick and easy access to this money. I use this account to save for annual bills that come up. It also physically separates this cash from other stock piles.
Will you need the money in the next 2 to 5 years?
This money I want to grow, but money I don’t want tied up in the stock market or retirement accounts. There is no immediate use for this money, but could be used for rainy days. Down payments. Etc. For that I use savings account options at places like Ally because of the higher interest that is earned.
Will you need the money in 10, 20, or 30 years?
I recommend then putting this money into long-term investment accounts with places such as: Vanguard, TDAmeritrade, Ameriprise, etc. These are the accounts and services you use to get even greater returns on your money over the really long haul.
Which should I choose first?
In reality, you should be putting money towards each of these savings options. Evaluating your goals will help you determine where it makes the most sense to put your money until you’re ready to spend it. However, if you’re still in debt and working towards paying it off, that should be your number one priority before you worry yourself too much with these different accounts.
Once your debt is paid off, you’ll be more financially free to take advantage of these different ways to help your money grow.