The weekly grocery shopping, school supplies, home repairs, a broken washing machine — it all quickly adds up and there’s very little money left to put aside. Many families do want to save, but very little — or nothing — can come from traditional savings accounts.
Fortunately, there is an easy option to grow the family savings without changing the way you live right now: a high-interest savings account.
Instead of the money just sitting in an account, you can actually earn more money over time. And what’s a better guarantee of financial stability in the future for you and your family?
Why Traditional Saving Methods Fall Short
While some families might deposit cash into traditional savings accounts or use other ad-hoc methods to save money for a rainy day, most families end up earning very little. Traditional savings accounts offer an average interest rate of 0.01 percent, which means family savings just sit there and don’t make any “profit” themselves.
Simultaneously, it’s risky to keep savings in family checking accounts or in cash form around the home. If the money is too easy to reach, it will be too easy to spend. It’s hard to follow through on the promise of committing money to future goals without having the money in a safe place.
What is a High-Interest Savings Account?
So, you’ve obviously heard of a regular savings account, right? Well, a high-interest savings account (HISA) is basically the same thing, but (wait for it) a HISA offers a better interest rate. What do we mean by “better”? Generally, the rate is at least 2x higher than a regular savings account; meaning your money grows passively over time.
Here’s an example — if you have $5000 in an account paying 0.01% interest you would earn approximately 50 cents of interest over an entire year. However, if the same amount of money was in an account with a 4% high interest rate, it would earn approximately $200 over 12 months. The difference can be big, especially when it is over a period of many years.
A high-interest savings account — unlike long-term investment savings accounts like term deposits or the stock market — can still easily be accessed whenever you need it. Further, they have no penalties in case you decide to make a sudden withdrawal. Thus, the perfect family savings choice — whether for short- or medium-term savings goals.
Benefits of a High-Interest Savings Account for Families
Family finance can easily benefit from a high-interest savings account, and here’s why:
- More effective means of growing savings: Build savings faster than a basic savings account can.
- An emergency fund safety net: Covers big one-off bills such as medical emergency repairs to the family home or car.
- Help save towards a goal: Work towards larger investments such as a well-deserved holiday, home improvement or your children’s education.
- No risk of losing money: Savings are not at risk to stock market volatility, allowing your family to enjoy the safe financial choice without missing out on interest.
- Encourages disciplined saving: Can act as a motivator for the family to use the money on worthwhile purchases rather than on impulsive purchases.
How to Open a High-Interest Savings Account?
Using a high-interest savings account is pretty simple. Here’s what to do to get it right:
Compare high interest rates: Find the banks or online institutions offering the highest high-interest rate accounts. Also, look out for special interest rates as an introductory offer for new accounts.
Check Fees and Limits: Some accounts come with monthly service charges, or limit the number of withdrawals you can make during a month. A savings account with low or no monthly charges means you can keep more of your money to earn interest.
Regular deposits: Taking the put-and-forget approach is an easy way to build up savings. Even small savings can add up (if you are consistent, of course) and eventually grow.
Set a goal: Why are you saving this money? Maybe for a family emergency, or a future investment, or a much-dreamed trip to the Bahamas? Because when you know how you plan to use your savings, you will stay motivated to be consistent with it.
Review regularly: High interest rates can change. Be sure to check on the received interest every now and then so you’ll know if/when it’s time to switch plans.
Long-term Planning: Investing may grow your wealth over time, but a high-interest savings account allows for additional savings, security, and planning.
A Simple Step Toward Financial Security
So, there you have it! If you want to maintain a family savings account responsibly, it is probably a good idea to start soon. And what better solution than a high-interest savings account that not only keeps your money safe but also multiplies on its own? With a thoughtful savings strategy in place, your goals get closer to becoming a reality at hand.
