Looking for high-interest savings? These accounts pay more than average.
The national average interest rate for savings accounts is a lowly 0.06%, according to Bankrate’s February survey of institutions —- which may not exactly have you pumped up to put your money in a traditional savings account. But experts say there are still reasons to have a savings account: You need between 6-9 months of expenses socked away in an emergency fund, and you may also have short-term savings goals. “Emergency savings or funds that you’ll need in the short term should be placed in an account that is easily accessible without penalties or tax consequences. Since the primary goal is accessibility and safety of principal, it’s okay to trade a low interest rate for that,” says certified financial planner Luis F. Rosa. But don’t settle for 0.06% — here’s where your savings can earn far more than average.
A number of banks are offering interest rates that are 0.50% or more. As of February 8, 2022, Marcus by Goldman Sachs is offering 0.50% with a $0 minimum balance and a $100 bonus depending on qualification, while both Discover Bank Online Savings and Ally offer 0.50% with a $0 minimum balance. LendingClub offers 0.65% with a minimum balance of $2,500, Monifi has an APY of 0.60% with $0 minimum and Comenity Direct’s rate is 0.60% with no minimum balance required. But watch out for fees or terms associated with the account, monthly minimums, as well as information like whether or not you’ll have the ability to write checks from it. In other words, read the fine print before you sign on.
Some savings accounts pay even more: Varo is one of the banks offering up to 3%, but Rosa recommends checking out their requirements to qualify as certain conditions must be met like utilizing direct deposit, keeping a daily savings balance of $5,000 or less the entire calendar month and keeping your bank account and savings balances above or equal to $0 for the entire calendar month. And the Aspiration Plus account, which costs $5.99 per month and is billed annually, offers 5% but also has a number of hoops to jump through.
It’s important to note that these terms change quickly (we noted these terms as of February 8). “If I say one bank today is better than another bank, that could change in a week. That’s the same with other investments. If it’s not a short term investment, you should be able to do much better than 0.06% over time,” says Robert Conzo, CEO and managing director of The Wealth Alliance.
And if you have longer term goals, these savings accounts are not the right choice. For goals at least a year out, you might want to consider Series I Savings Bonds from the US government, which are currently paying 7.12% for bonds purchased through April 2022, but you have to hang onto them for at least a year. For goals with a timeline of a year or a few years, you may want to think about something like CDs, pros say. “If you have money saved for a down payment of a home but you’re not planning on buying the home until one to two years from now, consider a CD with a short term, provided the interest rate is higher than the rate offered on a high yield savings account,” says Rosa. Meanwhile, if you want to save for something like retirement, investing is your best bet.