I am by no means a financial advisor – so take what I say about money with a grain of salt – but, for the life of me, I just don’t understand what the purpose of a traditional savings account is.
Allow me to explain. Currently, the national average earnings on a traditional savings account is only a mere 0.54%. Barely a half a percent! I guess that’s more than nothing; however, the problem is that, in most cases, banks charge maintenance fees when you don’t carry a certain minimum balance. So what ends up happening, oftentimes, is you pay $50 in maintenance fees per year, while you only earn a whopping $2 a year in interest. You pay the bank $48 a year to hold your money!!
I would be outraged if this were happening to me – but it’s not. I’d be better off keeping my savings in a box under my bed (which I don’t do that either). A better savings solution I’ve found, aside from having a 401K or IRA, is to do a high yield savings account through a company like Capital One or Ing Direct. (Again, I’m not suggesting you actually use these companies – they’re just examples).
Nevertheless, here’s the beauty of HY savings accounts through these sort of companies. They don’t charge you fees, they don’t have minimum balance requirements, they’re directly linked to your bank account, their extremely easy to set up, and the best part is, they offer incredibly better rates than your bank – like 4.5 – 5%. So what does that break down to? Well, on $1,000 dollars, that’s the difference between earning $5 and $45 (per year). I would much rather the $45.
But, hey, don’t take my word for it, check into it yourself.