Saving money in a bank can help you achieve your financial goals. Those might range from having a down payment for a house to ensuring you will not outlive your money in retirement.
Among the savings vehicles banks can provide are interest-yielding checking and savings accounts, money market funds, certificates of deposit (CD), and tax-advantaged 529 college plans and individual retirement accounts (IRA). However, you will have to shop around for what bank gives you the best “deal” or terms and conditions for where you now are financially. For example, if you are a Millennial, you probably cannot trade off a relatively high interest rate on your checking account for a $5,000 initial deposit and minimum monthly balance.
Therefore, your objective has to be to find the bank which offers what is the best fit for your current financial situation. That information is on the Internet, available through word of mouth, and by contacting banks and asking lots of questions.
At the end of the day, what you will find out is that, in general, online-only banks can provide the highest rates on all products with the fewest “strings” such as high monthly minimum balances. That is because their expenses are lower than brick and mortar banks which have to pay for real estate and live tellers.
The difference in what you earn from a savings account can be huge. According to educational financial website Magnify Money, if your $28,696 savings account is in traditional bank with essentially zero interest versus an online-only bank, you are not earning the $250 annually in interest you could be.
With all banks, your “gateway” product will likely be a checking account. Online-only banks will probably provide you interest on that. It is up to you for shop for the best deal for you. Your checking account provides the platform from which you can regularly transfer funds to save. That could be put into accounts ranging from savings to 529. That link to a savings account will also prevent fees for overdrafts.
As you investigate how to optimize saving money in a bank, you will find that you do not need to have a lot of money to go beyond “starter” products such as savings and money market accounts. For example, some IRAs can be started and maintained with $50 monthly. Later that amount can be increased. Meanwhile, as mentioned previously, the IRA provides tax advantages. A “windfall” such as a refund from the IRS can be put into a CD for a short time such as a few months. If you are pleased with the interest yield, then you can continue to save this way.
What matters most in building your wealth is developing the habit of regular savings. Saving money in a bank can help you do that.