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High Interest Savings Account

It is difficult these days to know how to invest money for the future. The times of being able to count on employers for a pension is long gone and the employer matched 401K is close behind, with the 401K somewhat in doubt on its own. The stock market has always been a risky place to put money, but until recently had a certain stability for those not chasing the quick fixes. Unfortunately, of late, even the most traditionally secure and stable stocks have had a tendency to plummet without warning.

So what is a person to do? Fortunately, there are other options out there. One of these is a high-interest savings account. These accounts offer a higher interest rate than standard savings, which have historically been a nice place to keep your money, but not a good way to invest it for retirement. The term “high-interest” should not be read as offering the same kind of return successful stock or bond investments will, and therefore should not be seen as the total answer to retirement planning. However, even with only an average 3% APR, they are an increasingly wise portfolio addition.

The main reason for this is that most such accounts are FDIC-insured, meaning that the government backs the money up to a certain amount. Thus, unlike stocks etc., this money and its accrued interest are not prone to sudden evaporation.

There are caveats with these accounts. The first is that they generally require a higher minimum balance than a standard savings account. They may also have different conditions on what can be withdrawn and when without penalties.

High-interest accounts can be found at traditional brick-and-mortar banks, and increasingly at online institutions. There is no one format that is consistently better than the other. Each offers different advantages depending on what the customer is looking for. Having accounts at brick-and-mortar banks may provide a sense of security that online banks do not, in that it is generally easier to have human interaction. Online banks sometimes offer higher rates or lower minimum balance, due to a reduced overhead. Ease of access will be another factor.

The most important factor involved in deciding to invest in a high-interest savings account is making sure you are working with a legitimate bank. Whether online or off, you need to ensure that the account is in fact FDIC-insured (don’t take this for granted) and you need to find out what amount it is insured for. Beyond that, it is up to the consumer to determine which organization or organizations offers the best fit for her investment needs.