“A Penny Saved is a Penny Earned.”

Investment accounts are not liquid and require long term commitment; checking accounts are very liquid but yield nearly no interest.  That is the reason to have a savings account – something in between a checking and investment account.  There are many options available for banks to have your savings placed.  Some will award you reasonable interest rates while others are actually at a rate lower than the inflation index!  Coming out ahead in this game is contingent to choosing the right banking institution to entrust them with handling your semi-liquid assets.

There are 4 important rules to follow when you choose your bank:

1. FDIC Insured
   

   The Federal Depository Insurance Corporation is a United States Government Corporation that guarantees checking and savings accounts up to $100,000 per depositor in the event of a bank failure.  This is especially important for you when a “new” bank offers abnormally high rates.  You also need to make sure that you don’t put all your eggs in one basket – FDIC will only guarantee you up to $100,000, even if you have $2 million in the bank.

2. Interest Rate
   

   Once you confirm that the banks are FDIC insured, you want to go with the one that offers you the highest interest rate.  This is often overlooked by most people because of the misconception that a few percentage point difference between banks are not really worth the trouble.  Let’s be serious – if you keep $5000 in your savings account at all time just in case of emergency and go with a local bank that offers you 1% interest (some even offer 0.5%).  You are going to be down by over $20,000 over the course of the next 30 years than that if you go with the highest rate banks at a rate of 4.5% to 6% per year.  Many banks advertise their APY instead of the APR.

3. Internet Banking
   

   We strongly suggest that you use the Internet banking system to simplify your finances.  Choose a bank with an internet presence will save you time and money when you have the option of checking your account balance, paying bills, and transferring funds between other savings and checking accounts. 

4. ATM's and Fees
   

   Go with a bank that gives you an ATM/debit card.  Some banks will charge you if you use your ATM card over a certain number of times each month.  Make sure you double check with the bank and verify that your spending habits do not result in such unnecessary fees.  Some banks will go as far as offering you a no fee ATM options even if you withdraw from other banks’ ATM’s!