Saving money is a smart financial decision, but keeping it in a low-interest savings account limits your earning potential. With current low interest rates, it might be difficult to find ways to maximize the earnings on your savings account. There are, however, a few tips you can use to earn more interest on your savings account.
Look for a High-Interest Savings Account
The first step in increasing the earning potential of your savings account is to choose one that pays a high interest rate. Many online banks and credit unions offer high-yield savings accounts with interest rates that are significantly higher than those offered by traditional brick-and-mortar banks. In comparison to the national average of 0.05%, certain high-yield savings accounts pay more than 1% interest per year. Before opening an account, make sure to shop around and compare rates.
Consider a Certificate of Deposit (CD)
A certificate of deposit (CD) is another option for increasing the returns on your savings account. CDs normally pay greater interest rates than savings accounts, but you must lock up your money for a specific period of time, which can range from a few months to several years. The interest rate rises as the term extends. However, keep in mind that early withdrawal may result in a penalty fee.
Keep a High Balance
The majority of high-yield savings accounts feature tiered interest rates, which means that the more money you have in your account, the greater the interest rate you’ll earn. To take advantage of the higher interest rates, have a high balance in your savings account. However, make sure you’re comfortable with the minimum balance requirement and any account fees.
Automate Your savings
You can save more money and earn more interest by automating your savings. Set up regular automated transfers from your checking account to your savings account. Depending on your budget and financial goals, this can be done weekly, biweekly, or monthly. You won’t have to think about it, and you’ll be less likely to spend the money before it’s transferred into your savings account if you automate your savings.
Use a Savings App
There are numerous savings applications available that can assist you in saving more money and earning more interest. These apps will frequently round up your purchases to the nearest dollar and deposit any change in your savings account. Some apps also provide cashback rewards that are directly deposited into your savings account. These tiny sums can quickly build up and help you earn more interest on your investments.
Avoid Fees
Fees might eat away at the interest profits on your savings account. Make sure you understand your savings account’s costs and try to avoid them wherever possible. Monthly maintenance costs, ATM fees, and overdraft fees are examples of common fees. Look for a savings account that does not or has low fees.
Reinvest Your Earnings
Consider reinvesting your gains if you have a high-yield savings account or a CD. When you reinvest your earnings, you earn interest on the interest you’ve already earned. This can dramatically boost the balance and earning potential of your savings account over time.
In conclusion, maximizing the earning potential of your savings account needs some time and forethought, but it is well worth it in the long term. You may earn more interest on your savings and meet your financial goals faster by selecting a high-interest savings account, contemplating a CD, maintaining a large balance, automating your savings, using a savings app, avoiding fees, and reinvesting your earnings.
