We save money for many reasons. One reason we save money is to provide an emergency fund in case there is an unexpected illness, in case we need to make a major repair in a car, or in case we lose our job.
Another reason we save money is because we want to save for a down payment in a house . We may also wish to save to buy a car or to take a vacation. We may save for a wedding. We may also save in order to invest later. Whatever the reason, saving is important and growing your money faster is also important.
One of the effective ways to grow your saving faster is through compounding interest.
What is compounding interest?
Compounding interest is interest you earn on the principal as well as interest on the accumulated interest. In other words, you earn interest on the money you deposit, and you earn interest on the interest you have already earned.
Now that you understand how compound interest works, you can choose a savings account where your money works harder for you. Online Savings Accounts are far the most popular savings accounts to grow your money faster. For one, they have better rates.
Online Savings Accounts Offer Better Interest Rates
One reason online savings accounts are better is because of the higher yield. Yields from traditional banks are between 0.1% to 0.3% right now. But if you save your money through an online savings account, you could earn as much as 1.3%, which is way better than 0.3%.
Online Banks such as Ally Bank, Capital One 360, Discover, and Barclays offer competitive interest rates, which can range from 0.75% to 1. 3%.
The only drawback to an online savings account is that your fund is not conveniently accessible. For example, if you need to withdraw money from your online savings account, you have to transfer it to your checking account. This can take between 2 to 3 business days. This delay can be problematic if you need the money immediately.
However, this is a small convenience considering how much your savings can grow. Also, this inconvenience means that you are less likely to touch this savings account for every little, non-emergency situation.
In short, online savings accounts provide better yields and interest rates.
How to pick the best online savings accounts that suits you
In addition to better yields and higher interest rates, there are plenty of other things that make online savings accounts more attractive. Among them are the fact that there are no fees and no minimum amount to open an account.
For online banks such as Capital One 360, Discover, Barclays, and Ally, there is no minimum balance to open an account and there is no monthly fee to to maintain the account. Plus, there are FDIC insured.
In short, with these savings online accounts, you earn high rates than most traditional savings accounts, there is no fee, no minimum balance, you grow your money faster with interest compounded daily.
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