Savings account mistakes to avoid

Savings accounts are one of the most common financial products Americans have. We all know that we should put money away for the future, and a savings account is often a method for doing so. In fact, it’s such a regular part of our financial lives that many of us don’t think about ours when we open it.

But not all savings accounts are created equal. They are not just a place to park your money. They can also help you the faster that money grows — if you know what to look for. To help you maximize your earnings, we’ve compiled some of the most common mistakes people make when it comes to savings accounts so you can avoid them.

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Savings Account Mistakes to Avoid

Don’t fall into these common savings account traps.

Putting money in a low interest account

Probably the biggest savings account mistake is letting your money languish in a low interest account.

All savings accounts earn interest, but some earn it at a much higher rate than others. If you don’t keep your money ua high yield savings accountyou’re missing out about potential earnings.

Consider that the average interest rate for a regular savings account is currently 0.40%, according to the FDIC. In comparison, rates for the largest high-yield savings accounts range from about 4.00% to 4.85%. Here’s what that means for you:

Let’s say you have $1,000 to deposit. If you put it in a 0.40% regular savings account, you’d only earn $4 after 12 months. However, in a savings account with a high yield of 4.85%, your $1,000 would earn $48.49 over the same period. And since interest rates are compounded, the difference in earnings only grows the more you pay in and the longer you keep it in the account.

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You don’t shop around for the best deal

High yield accounts are the best way to earn maximum interest on your savings, but rates vary from bank to bank and account to account. If you only look at the offers from your current bank, you may be stuck with a much lower rate than you could find elsewhere.

Take the time to research and compare today’s best high yield savings accounts find the one that will give you the most bang for your buck. You have many options to choose from, so don’t settle for the first one that catches your eye.

Only considering the interest rate

Getting the best interest rate is essential, but it shouldn’t be the only factor you consider when choosing an account. If the account comes with high fees or doesn’t offer the features you need, it might not be the best fit for you.

When evaluating your options, look at everything from maintenance fees to withdrawal limits to the size of the bank’s ATM network (if online bank). You want to strike a balance between the features you need, the interest you can earn, and the potential for any fees to eat into that interest.

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Conclusion

There’s another mistake to watch out for when it comes to saving: not setting (or sticking to) your goals. Without a clear savings goal With that in mind, it can be difficult to know how much you should be putting aside each month. And once you’ve set that goal, you need to avoid some common pitfalls to make sure you reach it.

Make meeting easier by automating your savings. For example, you can set up direct deposit for your paycheck so that a portion goes into your savings account each pay period. This eliminates the possibility of forgetting to contribute to your savings (or deciding you’d rather spend the money elsewhere).

Then resist the urge to use that money for unnecessary expenses. If you’re always withdrawing from your savings account, you’re not taking advantage of its benefits. It’s important to have self-control and remind yourself why you’re saving in the first place, whether it’s for emergency fund or a large expense such as a vacation. Your future self will thank you.