Savings Interest Rates
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Before joining a new bank, evaluating savings interest rates is a key factor for consumers to take into consideration. Most banks and financial institutions offer some type of basic savings account for customers. Minimum opening balances are usually quite low - usually $1 or $5, but some require higher balance to avoid monthly fees. Most people keep at least some cash in such funds where they can easily access it at any time needed. Plus, accounts are insured through the Federal Deposit Insurance Corporation up to $250,000, there is virtually no risk involved. Savings interest rates are notoriously low, compared to other high-end investments, but these safe and stable accounts are a great way to begin putting money away for the future and earn a little bit of extra money in the process.
Individual banks and financial institutions establish the savings interest rates offered. These percentages are most affected by the Federal Reserve. By raising and lowering the short-term interest rate that banks charge each other to borrow money, the Federal Reserve attempts to keep the economy stable. Lowering rates during a slow economy makes borrowing money more appealing, products and services more affordable for consumers, and keeps the economy moving forward. Raising rates during an inflated buying and selling balances the economy as well. These changes regulate the country financially, stopping it from slipping into inflation and recession, keeping companies and businesses active and protecting employers and their employees. Climatic and natural disasters, racial crises, and terrorism can also have a major impact on interest short-term interest rates. Long-term rates like mortgages are generally not as affected by economic conditions but will eventually shift with the changing tide.
Since savings interest rates fluctuate from bank to bank, consumers should research and compare plans before deciding to open an account. In addition to the percentage offered, banks will vary on the way that percentage is paid. Typically, gains are added to the account monthly, but some financial institutions will pay interest bi-monthly, semi-annually, and even annually. The longer money is kept in the account and the more frequent earnings are added, the more the financial yield increases. As money is credited to the account, it begins to earn interest along with the invested principal. This is called compounding or reinvesting interest. The same principle works in the fields. Seed is spread, yet the harvest it brings is far beyond what the farmer originally invested. "Now he that ministereth seed to the sower both minister bread for your food, and multiply your seed sown, and increase the fruits of your righteousness." (2 Corinthians 9:10)
Savings accounts come in all shapes and sizes, but there are two basic types. Passport accounts require individuals to enter transactions - deposits, withdrawals, and interest - into a booklet. Banks supply periodic statements for statement savings accounts that detail monthly or quarterly transactions. Similar to basic bank accounts, savings interest rates for money market funds are not fixed. Regulated by the U.S. Securities and Exchange Commission (SEC), money market funds are invested in short-term bonds and other government investments that are less risky that many other forms of investments. Plus, these funds tend to bring a higher rate of return than typical bank accounts. However, because they are available only through mutual fund companies, money market funds are not FDIC insured like bank accounts.
Bank savings accounts and money market funds can be beneficial for conservative individuals who want to keep money safe for short-term use. People who want to earn more than basic savings interest rates usually have to take higher risks with investments, but there are other options. Online banks and traditional banks with online accounts generally offer higher percentage rates. Members are given a username and password to access accounts and many online services. Banks save money by not having to mail regular statements or pay for bank tellers, so they can offer higher yields. Some banks and mutual fund companies also offer various high return accounts to preferred customers. These offers can include fixed deposit savings or monthly income accounts that are usually based on a maturity period of several years. Consumers who don't need access to their money for an extended period of time can invest in these accounts to earn greater amounts, but that money is tied up until that maturity period has come to a close.
But savings interest rates aren't the only thing that consumers should consider. Most banks limit the electronic, telephone and pre-authorized transfers as well as draft and debit card purchases that can be made each month. Others require a higher balance or direct deposits with more frequent withdrawals. In general, customers can withdraw money from an ATM as many times as needed throughout the month, but teller interactions are limited. Before opening an account, individuals should know and understand the bank's policies and limitations. Every financial institution is different as well as every policy. Online banking might not be a comfortable fit for everyone. Find a financial institution that offers a plan that best fits an individual's lifestyle and needs. That takes research and time. Savings interest rates may not provide a grand return on investment but it can provide a safe way to keep some money on hand in case of unemployment. Most investors split savings into a variety of areas including stocks, bonds, mutual funds, money market accounts, and other high and low yield funds of varying degrees of risk. This strategy balances out gains and losses in the fluctuating economy and have the opportunity to provide a solid retirement holdings for years to come.
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