It can be noticed that money saved in the savings accounts often attract low-interest rates and therefore yield weak returns. For example, the average percentage yield by savings accounts in the U.S. in February 2020 was 0.09%. In Germany, despite having an average of 1.37% from 2003-2020, it was reported at just under 0.10% in September 2020 However, savings accounts cannot be ignored because a savings account is regarded as an important part of any financial plan at hand. Nowadays, banks pay low-interest rates on savings accounts. The interest rates paid by the banks depend on the economic conditions experienced by the country and by the world at large.
One of the major reasons why banks often pay low-interest rates on savings accounts is the fact their main objective is to make a profit and they can only make a profit when the interest rates charged on the money lending out is more than the rate payable on the money deposited by people in saving accounts. The interest rate to charge on loans to businesses and individuals depends on Federal Discount Rate and Federal Funds Rate which is being control based on the economic condition. The lower the interest rate on loans, the lower the interest rate payable on saving accounts by banks. Also, some banks that have gained a large customer share in the banking industry may offer a relatively low-interest rate on saving accounts compared to other banks because they are not aggressively competing for new business.
What to do about it
The best option to gain a relatively high-interest rate on a saving account is to save in online savings accounts that come with perks. Online savings accounts offer relatively higher interest rates than those banks and therefore, ensure the best increase in their savings. With the help of technology, you can have a savings account online and carry out different transactions through your account. People should compare different companies offering online savings account to select one that offers the best savings account interest rates. Another is to put your savings in investments. If you have little knowledge on investing, a good way is to have a professional do it for you though they usually come at a high cost because of the professional direct service to you. Another option is to have your savings in investment platforms that automatically manage your savings on different settings (from safe to slightly more risky). Putting your investment to go along with popular and reliable indexes such as the S&P 500 are also a good way of growing your money.
At Fox Money, we are a bank that aims to encourage and reward you to save so you have savings to put into investments. The rewards, perks, and discounts that you could get on your savgins, overall, give you a potentially much higher return for your savings than regular banks. Our investment platform later will also help you grow your money in safe investments of your choice, may it be tech stocks (such as Facebook FB, Amazon AMZN, Apple AAPL, Netflix NFLX, Google GOOG) or popular indexes (S&P 500, FTSE 100, Dow Jones, Nasdaq, etc) or ESG-focused stocks (Environment, Social, Government). We will also soon offer investments in ETFs and cryptocurrencies (Bitcoin, Ethereum, Ripple, etc).