CHICAGO - Americans who are feeling frugal and able to squirrel away regular savings should think as hard about where to stash it as many did about stocks when the market was hot.
While the risks of losing a big chunk of its value aren't as great as with equities, savings choices include a broad array of options in terms of rates and access to the money.
"People have to shop around," said Greg McBride, senior financial analyst at Bankrate.com. "There's a big difference in settling for average versus snagging a higher return by shopping around."
Here are the best rates available in various parking spots for cash, along with some other observations about the different options:
Savings accounts are easily accessible and are guaranteed for up to $250,000 by the Federal Deposit Insurance Corp. However, rates traditionally are minimal - with annual percentage yields typically less than 3 percent and often under 1 percent. The average rate on a traditional bank savings account, generally known as statement savings, currently is 0.4 percent.
A good alternative for more competitive interest rates is to open an online account. The top-yielding online accounts available nationwide are Bank of Internet USA and Dollar Savings Direct, which recently offered yields at or just above 3.5 percent.
Money-market accounts - bank products, as opposed to mutual funds - are among the safest places to keep cash but also have low rates. Bankrate.com listed the average national rate on money markets recently at 0.54 percent, or 0.81 percent with a minimum of $10,000 invested.
Short-term bank CDs are FDIC-insured up to $250,000 per person per institution and generally offer higher yields than the other basic options. But you have to pay a penalty for early withdrawal. Bankrate.com says penalties of three months' interest on CDs are common of two to 18 months, or six months' interest on terms of two years or more.
Three-month CDs currently yield an average 1 percent, with the top yield available nationwide now 2.25 percent. Those rates may fluctuate daily; check Bankrate.com for the latest.
Longer-term CDs pay better but may not be appropriate for emergency savings that may be needed sooner because of the penalties. Six-month CDs yield an average 1.29 percent, with the maximum yield available nationally at 2.95 percent; with a one-year CD it's an average 1.63 percent and a maximum 3.25 percent.
A way to avoid locking up all your money in CDs is to set up a "ladder" of CDs with staggered maturities and then roll over each CD when it matures.
People need to be focused on four things before making any savings choices, says Stuart Ritter, a certified financial planner for T. Rowe Price in Baltimore:
• Make sure you either have or are building an emergency fund.
• Be sure to have the insurance you're supposed to have: health insurance, renters or homeowners insurance, and life insurance if someone else is dependent on your income.
• Save faithfully for retirement, especially if you have a match.
• If you have high-interest debt, work on paying that down.
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