It’s not possible to control all the events that impact your life, but one thing you can control is your ability to save. It’s not just about the amount of money you save, but how and where you save it. Maximizing your savings isn’t something that should happen only when you near retirement age. It’s something everyone should think about — even in your 20s or 30s.
- If you deposit $3,000 in a savings account that earns 5% interest each year, you’ll earn about $150 that first year.
- If you keep your money in the account, you’ll earn interest on your new principal balance of $3,150.
- Your new balance of $3,150 will earn you $157.50 in interest the next year. This will continue year after year and year.
- In a decade, you’ll have about $4,886.68 total – without even adding another dime into your account.
- If you deposit more money monthly or annually into that account, your earnings can grow at even higher proportions. But even if you don’t, your initial deposit will continue to grow.
Because of the benefits of compound interest, it doesn’t pay to store all of your money in a checking account (or a low-earning savings account). Even if you think you have the best interest rate out there, there’s a chance you can find one better. So, are you ready to find out even more ways to maximize your savings for a brighter financial future? Read on to find out how you can.
1. Open An Online Savings Account
One option to consider is opening an online savings account. Unlike a traditional savings account provided by a brick-and-mortar bank, an online savings account typically has a higher interest rate and lower fees. Online savings accounts can offer high yields because they don’t have to pay for expenses like physical locations or branch employees. As such, most online savings accounts also require no minimum balance.
When choosing an online savings account, it’s important to consider the advertised interest rate, but there are other factors you should think about. Do some research on the bank’s commitment to service, how the interest rates have trended over time (have they kept their rates steady or lowered them?), and transfer limits. (Transfer limits become really important if you link your online savings account to your current checking account, from which you may be doing a lot of transferring each month.)