You don’t have to be a numbers person to have a healthy bank account. But when it comes to savings, knowing a few key figures can help you maximize your options. Here are five numbers that can help you determine if a savings account is ideal — or if it could cost you.
1. Minimum amount to open
Some banks require a minimum deposit to establish an account. The minimum requirement is typically $25 to $100, according to the Consumer Financial Protection Bureau, though there are accounts with a $1,000 or even $5,000 minimum. But if you have to save up just to open a particular savings account, that account might not be right for you. And there are plenty of savings accounts with no minimum to open.
To really benefit from savings, including having an adequate reserve for emergencies, you’ll want an account where you can easily manage the opening deposit so you can start making regular deposits and saving.
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2. Interest rate
The interest rate is how much money your money earns while it sits in a savings account. For savings accounts, the interest you earn over a one-year period is often expressed as the annual percentage yield, or APY. So if you have $100 in an account and the interest rate is 1%, your money would earn $1 in interest. Over time, the interest earned in savings accounts also earns interest, something known as compound interest.
These days, many savings accounts earn low rates. According to the Federal Deposit Insurance Corp., the national average rate for savings is only 0.06%. But some of the best accounts have yields that are many times higher, with low (or no) minimum deposits.
Look for financial institutions that offer high interest rates compared with their competitors. The higher the interest rate, the faster your balance can grow.
3. Monthly fee
The monthly service fee is an important number to watch because it can work against your savings goals. Some financial institutions charge this fee, typically around $5 a month, for having a savings account open at their bank. But if you’re paying $5 a month, you’re paying $60 a year — money that you could be saving.
Some financial institutions may waive the fee for customers if they meet certain requirements, such as signing up for automatic deposits or keeping their balance above a certain amount (see #4 on this list). But many of the best savings accounts don’t charge these fees at all.
If you choose an account that has a monthly service fee, go for one …….