Savings accounts are an easy way to keep your money safe while gaining interest. Almost all banks and financial institutions offer some form of savings account where you gain interest.
The best savings account is going to be the one that requires you to have the lowest minimum balance with the highest interest rate. The interest you will earn equals to the Annual Percentage Yield the bank offers. This is also known shortly as the APY. This rate will help you shape an idea in your head how much your money could earn in a year.
So the higher the APY, the more your money will earn in return which makes the savings account the best out of all the other. However, there are a few things that you should know about APY. This rate refers to the annual return of interest. Given interest is paid on a monthly basis, the APY for every month needs to be divided by 12.
Here is an example for a better understanding of how APY works.
For $10,000 with 0.60% APY, you will earn $10,060 over a year. This would mean roughly $14 every month earned from interest. Therefore, the higher the APY, the more you will earn in interest every month.
However, the account may require you to keep your money in the savings account for an agreed period of time. This is usually 12 months but can be different depending on how much you’re going to deposit initially.
Here are our picks for the best savings account for the time being.
|Bank||Annual Percentage Yield (APY)||Minimum Deposit|
|American Express® High Yield Savings Account||.60%||$0|
|Marcus by Goldman Sachs Online Savings Account||.60%||$0|
|Alliant Credit Union High-Rate Savings||.55%||$100|
|Discover Bank Online Savings||.55%||$0|
|FNBO Direct Online Savings Account||.50%||$0|
Interest Earned and Taxes
The interest earned from a savings account is taxable. Regardless of how the interest is earned, income earned from all interest-bearing accounts are taxable. The bank that holds your account will furnish you with Form 1099-INT reporting the interest earned. Learn how much you are likely to owe in taxes with Forms 1099.
Other ways to earn interest
One thing you can always consider instead of opening up a savings account is a Certificate of Deposit. You can deposit a specific amount of money for a specific amount of term for a fixed rate of interest.
These forms of investments can be better than a savings account with a higher return but it certainly comes with drawbacks. Perhaps the biggest drawback is that you won’t be able to get your investment back before than term ends. Because of this, Certificate of Deposits comes with a variety of terms ranging from 3 months to 5 years.
All and all though, you will have more control over your money with a savings account and possibly this is the reason why most people choose savings accounts over other types of interest-bearing accounts or investments.
If you’re in the military or the spouse of a service member, Navy Federal Credit Union offers high-earning checking and savings accounts. Navy Federal is open to servicemembers, veterans, DOD Civilians, and family members. In addition to basic savings accounts, Navy Federal offers education savings accounts and SaveFirst accounts. Each type of account comes with different benefits and fees, but all offer competitive interest rates.
The UFB Direct Savings Account offers high yields and is a safe place to keep your money. Its parent bank, Axos Bank, uses a variety of security measures to protect your money, including voice verification, fingerprint verification, and digital image verification. Plus, your account is FDIC-insured up to $250,000 per account. This bank does not have any signup bonuses or APYs, but does offer customer service that is available around the clock.
Citi Accelerate High-Yield Savings Account
While this high-yield savings account earns higher interest rates than traditional savings accounts, it has its disadvantages. The account is not available in every state, so it is not a good option for those who are happy with their current bank. Those who live outside of the service area of the program should choose another bank. However, this type of bank account is still FDIC-insured, and the account is accessible online.