The average savings account now pays a pathetic 0.06%. Here 5 spots where your savings can earn way more

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According to Bankrate data from November, the national average interest rate for savings accounts is just 0.06%. Oh, is that so. Good News? You don’t need to go ahead with that low rate. First, look to banks online, as many offer higher rates than old-school brick and mortar — sometimes four or five times higher than the average, experts say. LendingClub is offering a 0.60% APY for accounts with a minimum of $2,500, and Marcus by Goldman Sachs offers 0.50% APY with a minimum, as you can see below, as are Chime, Salimai, Synchrony, and more. There are a handful others.

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Of course, these rates are not going to make you rich. And if you are willing to jump through more hoops, you can earn more. “Varo is one of the banks offering 3% but be sure to check their requirements to qualify if certain conditions are met. The same applies to aspiration, which is not a bank, but is paying 3% to 5% depending on the type of account you have,” says CFP board ambassador Luis F. Rosa. For example, with Varo, you start with earning 0.50%, but then quality up to receive 3% APY if you receive direct deposits totaling $1,000 or more each qualifying period, So keep a daily savings balance of $5,000 or less throughout the calendar month, and keep your bank and savings account balances greater than or equal to $0.00 throughout the calendar month.

Looking at these rates some may ask: is it still worth saving? Yes, say experts in certain circumstances. “Emergency savings or money you will need in the short term should be kept in an account that is easily accessible without penalties or tax consequences. Since the primary goal is access and protection of principal, trading a lower interest rate for that Well,” says Rosa, who adds to that short-term means about a year or less. Adds Scott Ward, financial planner at Johnson + Sterling: “Since things like car repairs and out-of-pocket medical bills Unplanned events may happen, the first step in a sound financial plan is to set up an emergency fund. While it would be nice to get an attractive return on emergency savings from your bank, the primary objective is to make money easy when the uh-oh happens. A reasonable goal, Ward says, is to set aside three to six months of fixed expenses in an emergency fund.

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If your savings goals are long-term, such as a year or more away, you may want to think differently. Rosa solicited Series I savings bonds from the US government, which currently pay 7.12% for bonds purchased through April 2022 and have a minimum period of ownership of one year. You can also consider CDs as part of your savings strategy if you don’t think you’ll need all of your money at once or if you don’t need access to the money until after the maturity of the CD. “Depending on your financial planning goals, it may be prudent to look at some investment and CD strategies for expenses that are due over the next two years,” says Ward. If you have money left over for a home down payment, but you don’t plan to buy a home until 1 to 2 years from now, Rosa says, “you might consider a CD with a shorter tenure.” i.e. from 9 months to one year, provided the interest rate is higher than the rate being offered on a high yield savings account.”

CDs are also a good option if you cannot take the risk with your investments. Corey Phillips, Financial Advisor at Fort Pitt Capital Group Says, “Within a 2-year time frame, you can compare CD rates to money market funds or other, safer, short-term investments, which are all viable options with a short time until your funds are needed. You have a time frame of more than about 3 years, so your options keep increasing.”

However, as the time for you to keep your money invested increases, the case for making CDs a good investment may become less. If your goal is far away, investing is better game. “Although the money in your bank account is protected because of FDIC insurance, it loses purchasing power over time due to inflation,” says Rosa. This means, if you leave money in a bank that earns a lower interest rate for years, you will be able to buy less with that money in the future, and the little interest you earn is also taxable. “It’s a good idea to start investing in something that is likely to provide a high rate of return over time to counteract the effects of inflation and taxation on income,” says Rosa.

Ultimately, Konzo says, successful saving depends primarily on one’s ability to save and how diligent they are about it. “For long-term goals, such as retirement savings, we recommend setting up an automatic savings plan in a 401(k), IRA, or investment account, whereby you set a monthly balance to take advantage of dollar-cost averaging. dollar amounts. As my grandfather used to say, ‘If you save $0.50 cents for every $1 you earn, you’ll be fine,'” Conzo says.

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