This is a great question to be asking right now. A few months ago many people would have been recommending the stock market. My how things have changed!
To find the savings account with the best interest rates, turn to our bff, Google. A quick search of “best interest rates” showed:
1.75% APY: CIT Bank Savings Builder (sign up bonus)
1.60% APY: Barclays Online Savings (low fees)
1.60% APY: American Express National Bank (low fees)
1.50% APY: Discover Online Savings (sign up bonus)
1.70% for $10,000+ balances APY: UFB Direct High Yield Savings Account Review
1.75% APY: Vio Bank (low fees)
1.70% APY: Marcus by Goldman Sachs (no fees)
Since Ally savings account did not appear, I googled “Ally savings account interest rate”. The search results show Ally has a 1.50% APY.
A quick search of “n26 interest rate” shows a 1.60% APY, no fees, and no minimum balance.
And, since I expected to see some CDs (certificates of deposit), I googled “cd interest rates”. Most are comparable to these rates unless you lock in for 5 years. Then I saw a 2% APY.
Then I googled “money market account interest rates”. Money Market accounts tend to have higher interest rates than traditional savings accounts. However, they, too, were similar to these rates.
Now, I could have just as easily included a location in the search query. This would have delivered a very different set of results.
But, regardless, the way you determine which option is best for you is the same.
The first thing you want to do is look at the banks listed. Do you recognize the bank’s name? If not, you may want to cross it off your list. Or, do some research to find out where the bank is, how long it has been in business, and its repuation.
Is your account backed by some assurance? For the USA, make sure the bank is FDIC insured. This means your deposits are insured up to $250,000.
Finally, read the fine print. Know what you are getting in return for your deposit.
Does the bank require you maintain a minimum balance?
Is the account liquid (meaning it could be easily converted to cash)? This is more likely to apply to bonds or CDs than savings accounts, but it is still a good question to ask.
What are the fees? Fees can eat up your savings quickly. You might be better off going with a no fee option that has slightly lower interest than to go with a higher APY with fees. To figure out which is best for you pretend you deposited what you plan to deposit. Now figure out how much interest you would earn and how much you would pay in fees after one month. Now, for a second month, Continue until you see a difference between your choices.
So, what is the best option for this person? A lot depends on her goals and life. If she feels comfortable committing her money (or a portion of her money) for 5 years, she could utilize a CD. Or, she may want to go with the n26 she already knows and trusts. 1.60% APY is not too bad. You would have to have a large balance or compound long term to see a difference between 1.60% and 1.75% APY. Or, she may decide to invest some in stocks that her children would enjoy tracking as a way to introduce them to the stock market. Or, she may want to consider a different investment vehicle. Or, well, the options are limitless.