How to pick a savings account

Trying to save money but aren’t quite sure which account gets you the most bang for your buck — literally? From traditional savings accounts to money market accounts and beyond, we’ve got you covered with a comprehensive guide to help you understand what to look for in bank accounts that help you save (and earn interest) and how to choose the best one for your individual needs.

Let’s get started looking at different vehicles for saving your money, and what you might want to look for when you open a new account.

Where to store your savings

At UBT, we have several types of savings options that cater to different needs:

• Simply Savings: A basic savings account with a suggested opening deposit of $100. It offers flexibility for easy deposits and withdrawals. These no-frills accounts are ideal if you’re looking for a way to save money with easy access for building an emergency fund or saving for short-term goals.
• Simply Savings Student: Designed for those 25 and under, this account has no maintenance fees and earns interest. They’re great accounts for young savers who want to start building their financial habits early without worrying about fees, while still earning modest interest on their savings.
• Value Edge Money Market: This account requires a minimum opening deposit of $1,000 and offers higher interest rates with easy access to your funds, similar to a checking account. Attractive for individuals who want to earn higher interest rates while maintaining liquidity, making it suitable for those who need both growth and access to their funds.
• Certificates of deposit (CDs): Offering fixed interest rates and terms ranging from 6 months to 5 years, CDs usually require a minimum deposit amount. They provide a secure way to grow your savings with higher returns compared to regular savings accounts, though early withdrawals may incur penalties. CDs are perfect for savers who can commit to leaving their money untouched for a set period in exchange for higher, guaranteed returns — ideal for long-term savings goals like a down payment on a house or retirement.

How do I choose the right savings option for me?

When choosing a savings account, consider the following features:

• Interest rate and APY: Look for accounts with competitive interest rates and annual percentage yields (APYs) to maximize your earnings.
• Initial deposit requirement: Some accounts require a minimum deposit to open. Choose one that fits your budget.
• Minimum balance requirements: Ensure you can maintain the required balance to maximize the amount of interest paid.
• Account fees: Check for any monthly maintenance fees or charges associated with the number of withdrawals allowed. If you don’t absolutely need to move your money out, it’s best kept in the account.
• Accessibility: Consider how easy it is to get money out of an account, whether through online banking or visiting a branch.

How do interest rates differ between accounts?

First, let’s explain APY, or annual percentage yield, which is the rate of return you can earn on your savings in a given year. When shopping for savings accounts, you will likely see both an interest rate and an APY associated with each account. While the interest rate represents the rate of return you will earn on your original account balance, APY takes into consideration the power of compound earning, which is when you earn returns on both your original principal and on the interest you’re accumulating. Essentially, earning compound interest means your money grows exponentially over time, and the higher the APY your account offers, the more interest you earn.

Interest rates can vary significantly between different types of savings accounts. For example, high-yield savings accounts typically offer higher interest rates compared to standard savings accounts. Money market accounts often provide tiered interest rates, meaning the more money you put in your account, the higher the interest rate you earn. Always compare the APYs of different accounts to find the best rate for your savings goals and your current situation.

What fees might I have to pay?

Savings accounts can come with various fees, including:

• Monthly maintenance fees: Some accounts charge a fee if you don’t maintain a minimum balance.
• Excess transaction fees: You may be charged for exceeding the number of withdrawals or transfers allowed per month. (For example, a Simply Savings account from UBT allows you to make six free debit transactions per calendar month; once you reach that limit, we assess a $5 fee for each additional withdrawal.)
• Early withdrawal penalties: These are penalties for closing a CD within a certain period or before a certain date. For instance, you might face a penalty if you withdraw money from a CD before its maturity date.

Questions to ask when choosing how to save

To choose the best savings account, follow these steps:

1. Identify your needs: Determine what you need from a savings account, such as high interest rates, low fees, or easy access to funds.
2. Compare options: Look at different accounts and compare their features, interest rates, and fees.
3. Consider your financial goals: Choose an account that aligns with your short-term and long-term savings goals.
4. Check for additional features: Some accounts offer perks like automatic transfers, online banking, and mobile apps, which can enhance your banking experience.

How many savings accounts should I have?

There’s no one-size-fits-all answer, but having multiple savings account types can help you manage different financial goals. For example, you might have one account for an emergency fund, another for a vacation fund, and a third for long-term savings. 

What should I have in my savings account?

Your savings account should ideally have enough funds to cover at least three to six months of living expenses. This provides a financial cushion in case of emergencies. Start by saving enough to cover a large expense, like a car insurance deductible. As you continue to save, aim to have an emergency account of 3-6 months of expenses. It’s also smart to have savings goals for things you want, like a vacation or new phone.

Your bank is there to help

By understanding these key aspects, you can confidently choose the best savings account for your needs and start building a secure financial future. Happy saving!