In high inflation times, keeping your savings in cash or on a PayPal account means huge losses. So what should you do if you make some money working as a proofreader or blogger? Set up a savings account with the highest interest rate! This article is a compilation of the most important facts about this type of account.
Why are there savings accounts?
Saving accounts, as the name suggests, are used to save money in the bank. Saving accounts rates are usually higher than normal accounts, but in return, certain restrictions are imposed.
The money on these accounts gives banks cash flow and allows them to lend these funds. Saving accounts rates tend to be higher because customers are less likely to choose to withdraw their money, so banks have a steady reserve of money.
Why are savings account interest rates so low?
Inflation is high worldwide, and in many parts of the world the rate is the highest in 40 years. In the U.S., it is 9%, in the UK 10% and in Germany 7.5%. This means that our savings are losing value by several percent each year, and it would be nice if banks would let us compensate for it.
Unfortunately, the central banks' low interest rates are a source of cheap money. Banks are not interested in lending money in exchange for 5% a year if the FED, BoE and ECB agree for 2%. Therefore, if you live in countries where interest rates are low, you have to accept low interest rates or start investing.
What to look for when choosing a savings account?
Unfortunately, reality is sometimes rough. While it is not difficult to find a savings account with the highest interest rate, it may not necessarily be the most profitable. Banks often charge additional fees, for example, for the ability to withdraw money, account maintenance fees or commissions for transferring money to accounts from other banks.
Sometimes it is worthwhile to choose an account with a lower interest rate, because the fees will turn out to be lower. Remember that you will find the specific details of your account in your account contract. Advertisements are not a good source of knowledge, because no bank will mention the disadvantages of its investment products.
An account in my bank or in another bank?
This is a rather difficult question. On the one hand, a savings account opened with your current bank will give you more convenience, because you will be able to easily link it to your current account. In addition, the process of verifying your data will be much simpler, and all paperwork will be reduced to a minimum.
On the other hand, offers for new customers are frequently very attractive. Even if your bank offers you good terms for a regular account, their savings account may just be mediocre. That's why it's a good idea to use the various account comparison sites you'll find online.
Saving account with highest interest rate
Currently, CFG saving account is a savings account with the highest interest rate of 2.55%. Other savings account interest rates range between 2 and 2.3%, so competition between banks is extremely intense.
Not to be sidetracked, we also recommend: Ivy Bank High-Yield Savings Account and UFB Direct High Yield Savings Account.
The best savings account interest rates oscillate around 2%. Better than nothing, but inflation in the US is, after all, much higher. So are there any other options to achieve higher rates of return? Indeed!
For example, you can invest your money in gold, silver or ETFs. Although riskier, the returns can be up to 8 times higher! However, remember to expand your knowledge of investing first, such as with THIS guide.
If not investments, how about reducing expenses? On our blog you will find several valuable articles on budgeting, for example, ranking budgeting apps and text about budget planners. Although nominally you won't make money on it, your salary will allow you to buy more essential goods.
Remember that this article is not investment advice and should not be treated as such. Any decision related to money should be made entirely on your own, as investing involves risk.