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Why You Need a High Interest Savings Account
Having a savings system can help you reach your goals sooner while giving you a financial cushion. We have a few goals that we save for including:
- Emergency Fund – If both of us are employed, then we’re comfortable with at least 3 months saved. If one of us is steadily employed then we prefer 6 months or more in the bank. This money is not touched unless there is an emergency.
- Vacation Fund – I should point out that vacations are paid with the credit card first and then we pay it off before the grace period is over. We would rather not have a hold on our checking account for car rentals and if there is a dispute, it won’t affect our day to day routine as the credit card works it out.
- Car Fund – We used the car fund earlier this year to buy a family sedan. We now have the car fund to help us whenever we need to get maintenance or repair work done.
- Freedom Fund – We’d like to have some money set aside to smooth an employment transition should my husband choose to become self-employed.
If you are saving you want your hard earned money, please double check that the account:
- Easy access to it – It does you no good to have a high interest rate if you can’t get to it quickly when it’s most needed.
- Safe place to store you money – Whatever you choose, make sure it’s either covered by the FDIC (banks) or NCUA (credit unions).
- A place where it can grow – If you can earn a decent interest rate for your savings while meeting the two previous criteria, then go for it.
Many online banks offer rates higher than brick and mortar options because they do not have the overhead costs of running branches, so you get better rates. We have taken advantage of this by contributing to our savings regularly with automatic transfers. It's easy and we speed up the process for reaching our family's financial goals.