There are a wide range of bank account options that you can consider investing your funds in. One of the more common options available is an interest bearing account. The most popular type of interest-bearing account is a savings account. But there are other types of accounts that can generate interest as well.
After you have learned more about what these accounts are and how they can be used by you strategically for financial management and security, you will see why you need to have at least one of these accounts in your financial life.
What Is an Interest Bearing Account?
An interest bearing account is simply any type of account that earns interest. Savings accounts as well as some types of checking accounts commonly accrue interest. There are a wide range of account options available. Some of them are:
- The bank accounts with a minimum account balance. These earn a higher interest rate.
- Also, there are those with no minimum account balance that have a lower interest rate.
Some people are perfectly content keeping their hard-earned cash in a proverbial mattress under the bed. However, you may be aware that the interest from these accounts protects your balance from the effects of inflation at least partially. In addition, the funds are safeguarded and insured by the federal government up to a limit.
Who Needs an Interest Bearing Account the Most?
Now that you know more about what an interest bearing account is, you can see that there are many benefits that you can enjoy by investing in one of these accounts. The reality is that most people will benefit from having at least one interest bearing account. Some people will even have multiple savings accounts or a both a checking and a savings account that earn interest.
It is always better to have your funds producing some interest for you rather than simply sitting in a non-interest bearing account. From children who open their first savings account to working adults, and company owners, and even retirees, there is a place in everyone’s portfolio for this type of investment.
How Much Money Is Usually in an Interest Bearing Account?
There are many types of interest bearing accounts that you can open. But perhaps the most common type is a rainy day savings account. With this type of account, you will sock money away until you have an unexpected expense that requires immediate payment. For this type of account, some experts advise you to save six to eight months’ worth of expenses in the account or more.
However, there are other types of accounts as well. For example, you may have a savings account that helps you save up for holiday gifts or a summer vacation. You may regularly increase this balance until you have enough funds available to accomplish your specific goal.
5 Helpful Ways to Increase Your Interest Bearing Account Balance
Increasing the balance in your interest bearing account is a top goal. So, you may be wondering what steps you need to take to make this happen. There are several factors that can affect how quickly your account balance grows. Put these tips into action for the fastest results.
1. Automate Your Savings Efforts
Regardless of the type of interest bearing account you have, one of the best steps that you can take to bolster your account value is to automate your savings efforts. Through many banks, you can set up automatic bank transfers.
For example, you may transfer $50 from each paycheck to be transferred to your savings account balance. Through slow, steady efforts, you will see your account balance rise to a substantial level.
2. Look for a Low-Fee Bank Account
Bank fees are unfortunately common with interest-bearing bank accounts. Consequently, these fees may be much higher than the total return you enjoy on your bank account. The fees vary by bank as well as by account type. Therefore, look for a bank as well as an account type with low fees.
Credit unions as well as online banks usually have comparatively low fees that you can take advantage of. This is valid for both interest-bearing checking and savings accounts.
3. Choose an Account with a High Return
Just as the fees can vary from bank to bank and account to account, the same holds true with your return. Your return equates to your interest rate. So the higher the interest rate, the better the growth results.
To qualify for accounts with the highest yield, you generally need to keep a higher balance in the account at all times. Some high yield accounts may charge a penalty fee if your account drops below a specific level. Ensure that you set up the account that is most strategic for your needs.
4. Know When to Invest in Other Assets
Even the highest yield savings account may only produce a nominal return for you overall. While it may make sense for some people to keep $25,000 or more in an interest bearing account with ah relatively low yield, most investors find that their funds can be better allocated elsewhere.
Consider your specific financial situation and your future need for funds before you decide exactly how and where to invest your funds.
5. Only Use Funds for Planned Expenses
One of the things that can have the greatest impact on how quickly your balance level grows relates to spending the money. Many savings account balances, such as for a rainy day fund or a vacation fund, are meant to be spent at some point.
However, when you spend the money on things that are not legitimate expenses related to your goal, your ability to accomplish your goal is diminished.
To Your Money
Saving money in one or more interest-bearing accounts is a smart idea. Take time to determine what you want to save for as well as how much money you need to save. Then, shop around for the most cost-effective account to use.
These initial steps will get you well on your way to benefiting from an interest bearing account soon.