How to Decide Which Savings Account is Best

Most financial institutions automatically offer a savings account to customers that open checking accounts. Usually, the account holder agrees to open the account without question. However, choosing the right savings account is an essential part of creating a sound financial foundation that makes sense for the individual.


To choose a savings account without much thought can cost money in terms of lost interest and potential monthly fees associated with certain accounts. What factors should be considered when selecting a savings account? Which financial institutions are ideal? These and other questions will be answered under the topics:

  • Question and Answer Session
  • Savings Account Options
  • Interest Rates
  • What to Watch Out For
  • Savings Account Stats in Canada and the U.S.

Question and Answer Session

As the saying goes, there is no such thing as a stupid question, except one that isn’t asked. This is especially true when it comes to money matters. An unasked question, no matter how seemingly small, can take money out of the customer’s pocket and give it right back to the bank. 


With that in mind, below are questions and answers about the world of saving money. The answers may be just the ticket to start down the path to choosing the savings account with the most benefits.

Q: What is the difference between a savings account and a checking account?

A: A checking account is designed to take care of frequent everyday transactions like writing checks, automatic debits or ATM withdrawal. They’re like the revolving door of banking-cash in, cash out. Although some checking accounts offer a bare minimum of interest, most are used for short term deposit transactions. Therefore, they are not ideal for people trying to make their money work for them. 


On the other hand, a savings account is for adding money for the sole purpose of collecting interest; it is a tool for financial growth.  Savings accounts are used to deposit and keep large sums of money which is not intended to be drawn upon regularly, so interest rates tend to be higher. 

Q: What financial institutions offer savings accounts?

A: Consumers can choose a savings account from brick and mortar banks and credit unions in addition to online banks.

Q: Are saving accounts the only way to save money?

A: No, there are a variety of financial vehicles to sock away funds for a rainy day. They include money market deposits, CD’s (certificates of deposit), bonds, and treasury bills. For the new saver with limited funds, a savings account might be the right choice since the other options usually require a higher initial deposit.


When it comes to money matters, planning is the key to success. For people who decide to invest in their future by saving money, it is important that they plan ahead. The efficient way to decide which savings account to choose is to give some thought about what services are wanted or needed.


Savings tips don’t stop here! Continue to grow your knowledge about how you can invest and save your money beyond utilizing a savings account by reading our, Complete Guide to Saving Money. 

Savings Account Options

Savings accounts can include a variety of features, depending on the institution. Not all account holders have the same wants or needs, so choosing a saving account that isn’t high maintenance but with useful features guarantees less hassle in the long-run. 


Seven saver-savvy features:


1. A bank that is conveniently located with acceptable hours.

2. The bank offers ATM cards, free ones in particular.

3. Low cost wire transfers are available for account holders that need them.

4. Deposits can be made electronically on computers or mobile devices.

5. Safety deposit boxes are offered to customers.

6. Banks that waive fees when certain balances are maintained.

7. The bank takes security seriously, with strong privacy protections in place.


Throwing caution to the wind and picking a bank without researching is never a good idea. Choosing a savings account from a well-known reputable financial institution that offers multiple features will make saving more appealing and easier.

Interest Rates

To cut right to the chase, the point in choosing a savings account versus putting cash in mason jars buried in the back yard is to make money. Therefore, talking interest rates should be the first order of business, whether speaking to a banker in person or shopping for an account online. 


Looking for a high yield savings account is a great start. Ideally, these accounts will offer a high APY (Annual Percentage Yield). APY is the total amount of interest earned over the course of one year. The total of the APY is a calculation in which the interest rate as well as the compound interest are factored. 


Compound interest is the interest which is calculated on initial principal invested. But what gives compound interest its power is that it is also calculated on interest that has accumulated over previous time periods. For this reason, deciding which savings account is best should include one that offers compound interest that turns money into a work horse for the account holder.


Interest is compounded in a variety of ways. Overall, the more frequently interest is paid yields the most benefit from compound interest. For instance, if a savings account compounds interest on a daily basis, there is a higher overall yield earned as opposed to monthly or annual compounding.

What to Watch Out For

There are other matters to consider in making the decision which savings account is best. These include:

Are the best interest rates only offered to customers who use other banking products like safety deposit boxes or checking accounts?

Does the account require maintaining a minimum balance at all times?

Will failure to maintain a certain balance or to utilize direct deposit each month result in losing interest?

In addition to lowering interest, some banks charge extra fees. They are often hidden in the small print; savers should read carefully and ask questions often prior to opening an account. On the flip side, there may be positive perks attached to doing certain things. For instance, adding just five hundred dollars to the initial deposit may mean a point more in the interest rate. In cases such as this, biting the bullet and adding more money pays off. 

Savings Account Stats in Canada and the U.S.

It is interesting to see how other people decide which savings account is best. Just as every individual is unique, so are their savings choices and the reasons behind them. As an example, in Canada, life cycle patterns played a large part in how people saved. Households with a major wage earner between the ages of 35 to 54 were more likely to contribute to a Registered Retirement Savings Plan (RRSP), while a larger number of younger wage earners under 35 contributed to a Tax-Free Savings Account (TFSA).


Over 65% of Canadian households contributed to at least one type of registered savings account, according the 2016 Census. Compared with national averages, households in Atlantic Canada tended to be less likely to contribute to an RRSP in 2015.


In the United States, savings accounts are the more popular kinds of bank accounts. Over half of households have at least one savings account. Fifty seven percent of Americans have less than $1,000 in their savings account. And although 55 million U.S. citizens have no emergency savings, 29% have at least six months of savings stashed away.


Whether it’s picking out a house to buy, purchasing a car or simply deciding on which ice cream flavor to eat, people make multiple decisions daily. Even seemingly minor choices have an impact in some fashion. When it comes to finances, the result of choosing the right savings account can create money-making opportunities now and far into the future.

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Sheila Kay

Sheila Kay is an author, ghostwriter and editor residing in the Atlanta, GA area. Among her favorite writing genres are creative nonfiction, self-improvement, and finances. Her first published book, PTSD and the Undefeated Me, is a memoir which has been a stepping stone to her involvement with mental health advocacy for military and civilian men and women. She is currently working on the first fiction novel to be published under her name. For more information or to purchase her books, visit Sheila’s Author Page on