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Improving your financial life may be a big goal for you as we close out 2020 and enter a new year. Managing your money well begins with keeping it in the right places.
If it’s been a while since you shopped around for a savings account, this could be the right time to determine whether your bank still meets your needs and look for a replacement.
Signs it’s time for a new savings account
This year, the Federal Reserve slashed its benchmark interest rate to zero, and it isn’t planning to lift rates any time soon.
That means savings account yields will stay low in 2021. The best savings account rates available nationwide are currently around 0.5 percent. That’s a sharp fall from a year ago, when the top-yielding accounts were paying around 2 percent, but it’s still more than five times the national average of 0.08 percent.
If your savings account pays the national average or even worse, that’s a good reason to consider making a change and comparing rates.
“Any day is a good day to improve the rate of return, particularly if your money’s sitting in an account with a non-competitive yield,” says Greg McBride, CFA, Bankrate chief financial analyst.
Another indication that it’s time for a new savings account is if it’s costing you more money than you can afford in the form of fees.
“What people should really be looking for are no-fee, low-opening balance accounts,” says George Barany, director of America Saves, a campaign aiming to help low- to moderate-income households improve their financial situation.
Choosing a new savings account
Finding the right savings account will likely require some effort. The easiest route to take may be opening a new savings account at your existing bank. But it might not offer the product that’s the best fit for you, Barany says.
Besides fees, interest rates and balance requirements, other factors to take into account include:
- Branch access
- Customer service
- Digital tools and features
- App ratings
- Sign-up bonuses
Before picking a bank that’ll pay you a bonus just for opening a new savings account, make sure you read the terms and conditions. You’ll often have to meet a minimum deposit threshold and set up direct deposit to get the bonus.
Just one savings account may not be enough for you. If you have multiple goals or you would prefer to separate your funds into different buckets, consider looking for online banks that make it easy to open and name many accounts at once.
Grow your savings
If 2020 taught us anything, it’s that there’s no telling what could be in store for us in the future. Aim to build your emergency fund so that you have enough savings to cover unexpected expenses and other costs that could knock you off your financial course.
If saving money is difficult, make it a resolution in 2021 to fix that. Go through your budget and find opportunities to save. Automate your savings so that a portion of each paycheck goes straight into a high-yield savings account. And if needed, speak with a financial adviser who can help you figure out where your money goes every month, says Wendy Terrill, founder and CEO of Assurance & Guarantee, an insurance firm in Burlington, North Carolina.
“Make yourself a good New Year’s resolution and say this year I’m going to get together with somebody that’s going to help me actually attain my goal that I’ve wanted to do for years and have never been able to do and that is to start setting money aside,” Terrill says.