How to Choose a Savings Account

Second to the personal checking account, the savings account is the most basic of financial accounts that there is available to you.

The reason banks came into being was to have a safe place to secure your cash. Then, the concept of earning interest on your balance was born, and hence the savings account was born.

A savings account should be a part of your overall financial plan. You can have a savings account for several purposes, but it does not affect how to choose a savings account. You basically only need to heed this advice:

What is the Purpose? Answer this question first by using these criteria: is it for long-term or short-term savings? The reason that this is important is more for your benefit than anything. You need to attach a purpose to your savings account, that way you will not be as tempted to use the money for things that it is not intended.

Long-term savings is money that you do not touch unless it falls into one of these categories. A major purchase such as a house, car or luxury item that costs a significant amount of money. A major unexpected expense like medical or other emergencies or semi-emergencies. This account is established so that the money is there an available when needed.

Short-term savings is money that you use for small expenses like a major appliance, tires for the car, house repairs, or other such items. While many of these items are unexpected, they would not be in the dollar amount of the larger expenses.

Compare to Other Accounts. It is true that you can earn a better rate on an account like a Certificate of Deposit or Money Market account, but those two accounts have their purposes also, and might have penalties for early withdrawal of funds.

You will want to consider opening a savings account at a banking institution in which you already have a checking account. That way, it is easy to move money between accounts. The short-term account is very good for this purpose. The long-term, not so much, but it still gives you the accessibility if needed.
The interest rates between banks will be competitive. If you shop around, you will find rates that are pleasing, but they might be dependent on you having another account with the same institution.
Keep your money secure and organized with a few savings accounts, and use them wisely.