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The best high-yield online savings accounts offer strong interest rates and great customer service, making them a popular option for savers. Studies also show online savings accounts often come with lower fees.

“High-yield” is unfortunately a bit of a misnomer these days; a decade ago, interest rates were 4% and 5% among select savings accounts and money market accounts. Today, the best rates are around 2% while a fair amount are still hovering around 1% or more. This trend will continue until banks and credit unions need more cash from depositors.

Interest rates.

Interest rates are important because money shouldn’t lose too much purchasing power. In a perfect world, interest rates offered by banks should beat inflation while preserving the balance without risk. I am not aware of any bank offering a savings option with ongoing interest rates high enough to beat inflation, whether measured by the government-reported CPI-U or by any other meaningful measure of consumer prices. Nevertheless, if your savings is at a brick and mortar bank earning below 0.25% APY, choose one of the better options below.

Customer service.

When evaluating customer service, there are two important factors to consider. The best banks offer all account maintenance and transfers through a professional, reliable, and easy-to-navigate website. Secondly, live customer service representatives should be knowledgeable, helpful, and available, although customers should have to deal with a representative infrequently if at all.

Based on my own experiences and reviews from other Consumerism Commentary readers, here are the most-recommended accounts for short-term savings. All of the listed interest rates directly below from our partners and in the table that follows are current but they are subject to change by the banks. Although I have nine accounts listed below the table of rates, you don’t need to have accounts with that many different banks. Choose one that fits you the best.

First, here is a list of the latest interest rates. Following this table, I offer a few of my own observations and opinions about savings accounts from nine popular online banks. Read the full article →


New baby? No doubt this new arrival has turned every aspect of your life upside down in the best possible way. Now is the time to make sure your financial house is in order. Here’s a 10-step account and financial checklist to lay the groundwork for your little one’s successful future.

New account checklist for new babies

1. Apply for a Social Security number for the baby: An SSI number is the linchpin to open a bank account in your child’s name, purchase savings bonds, obtain medical coverage and access government benefits.

2. Review your life insurance: If you don’t have life insurance, you should get coverage as soon as possible. If you already have a life insurance policy, check to make sure it’s adequate to cover the needs of the new addition to the family.

3. Pick a guardian: Choose a family member or close friend who is willing and financially able to care for your child, should you or the other parent pass away or become incapacitated before your child turns 18.

4. Set up powers of attorney: Put in writing your legal power of attorney, which sets out who will be responsible for your financial and personal affairs should you be unable to make those decisions for yourself. You also should set up a health care power of attorney that makes your wishes known in the event you become seriously ill and are unable to participate in decisions about your care.

5. Write your will: It’s not just wealthy people who need a will. Every parent should create a document spelling out how his or her estate should be handled. The will may also include or reference legal guardianship and powers of attorney.

6. Open a savings account in the baby’s name: Choose a no-fee, no-minimum balance, online savings account. You can link the savings account to your checking for automatic withdrawals.

7. Set up an emergency fund: You should put aside money from each paycheck into a savings account with the goal of having sufficient funds to cover living expenses for six months.

8. Review your work benefits: Confirm how much paid (and unpaid) maternity leave is offered through the birth mom’s employer, and whether paid leave is available for the other parent. Determine how you will obtain health benefits for the baby, either through an employer or government plan. Consult with your human resources office on flexible spending accounts and other benefits that may apply to your situation as a new parent.

9. Check in with Uncle Sam: You can claim a tax credit of $1,000 for your new baby and take an annual tax deduction of $3,950 for each dependent child. You can also receive tax credits if you adopt a child and/or if you pay for child care. You should review your withholding status, which could mean that more take-home money is available to increase your emergency fund every month, for instance. Single parents may be able to claim head-of-household status.

10. Start saving for college: Set up a 529 savings account, which generally is not subject to federal and state taxes if used to pay for college tuition. (If the funds are used for other purposes, earnings may be subject to a 10 percent federal tax penalty.) Details on fees and other aspects of the 529 plans vary by state, so do your research.


Retirement does not always go the way people expect. While no two experiences are exactly the same, over time it seems that people’s financial situations in retirement tend to fall into one of a few distinct categories.

As you think ahead to how you want your retirement to go, keep the following categories in mind. They offer useful examples of what to avoid and what you might want to emulate.

1. Keeping up appearances.

Even though people tend to think of their finances as personal business, their wealth is often presented to the outside world in a variety of ways. While you probably won’t walk around sharing the latest information on your savings account balance with everyone, the car you drive, the house you live in, and the clothes you wear all provide clues as to your financial well-being, even if you don’t think of yourself as particularly status conscious.

Unfortunately, the public face of wealth can create a form of pressure that leads to poor financial decisions. One reason people sometimes spend beyond their means is to keep up public appearances — whether that entails trying to compete with friends and neighbors or trying to maintain a prior standard that you can no longer afford.

Another example of how trying to keep up appearances can be a distorting influence is that breadwinners often want to spare their spouses and children from any financial anxiety. Thus, they may hide any financial setbacks or be reluctant to admit the true limitations of their incomes. As a result, family members conduct themselves on the assumption that they can afford more than is actually the case, when they could be playing important roles in trying to economize if they knew the truth.

People can be particularly vulnerable to these behaviors in retirement, when not having wage income makes a financial reversal more difficult to overcome. Taking pride in your financial well-being is understandable; but remember that the longer you maintain an inflated illusion of your wealth, the worse the blow to your pride will be when the truth finally does come out.

2. Gambling and losing.

People in retirement are heavily dependent on the success of their investments, and this leads some people to take dangerous risks in order to try to improve their financial status.

Especially now, with savings account and CD rates so low, people are resorting to riskier investments to try to earn a decent rate of return. Earning next to nothing in a deposit account may be frustrating, but it’s not as frustrating as suffering damaging losses.

Some element of investment risk is necessary to earn the growth necessary to stay ahead of inflation, but don’t make investments without being fully cognizant of their downsides. Risk management is critical in retirement because drawing money out of your accounts to live on can amplify the impact of downturns, and your near-term spending needs mean that you don’t have as much time to recover from losses as when you were still working.

3. Downsizing.

Some people are able to afford retirement because they downsize many aspects of their lifestyle — smaller house, fewer dependents, less entertainment, etc. This need not be a matter of financial necessity. Often, a simpler lifestyle can be appealing to people in their later years.

One caution about planning on downsizing in retirement is to make sure you properly account for what your specific expenses will be, rather than just blindly assuming you’ll be able to live on a fraction of the money you needed when you were working. Also, remember that health care can grow to be a huge expense in retirement, especially if you have to move into a managed care facility.

4. Second careers.

Another way of affording retirement is to keep some income coming in via a second career. Some people do this out of necessity because they do not have enough money for retirement, but in many cases people like to keep working because it occupies their time and makes them feel useful.

Semi-retirement can be a perfect way to take things a little easier without completely withdrawing from the working world. As a retirement funding strategy though, don’t assume you will be able to keep working for as long as you want. Health issues or dated skill sets can make it harder to continue working as you grow older.

5. Conservation.

Ultimately, retirement is about conservation of your financial resources — making sure that what you have can be stretched to last over the remainder of your life. The problem is, no matter how carefully you plan ahead, there are some things you just cannot know in advance. Unexpected expenses, substandard investment returns, and your longevity can all make it more difficult to make your money last.

The answer is that conservation of financial resources requires frequent adjustments. Rather than being a course you can set and forget, managing your finances requires regularly refreshing your plan to see how the latest information on your financial status affects how much you can afford.

Planning for retirement

Retirement is not defined solely by finances. How you choose to occupy your time and whom you spend that time with are critical factors in post-career happiness. However, it cannot be denied that money is also a big influence on that happiness. For one thing, it dictates your level of comfort and the number of options you have. More than that, though, there is the psychological impact of having to live with the consequences of decisions you made throughout your career and beyond.

A lot goes into this. As you think back in retirement, you may be able to trace your financial condition all the way back to decisions you made about your education, and then to the effort you put into your career, how sensible your spending was, and how wise an investor you were. You might not always have made the right choices, but psychologically the important thing is to be able to look back on those decisions without regret. Being able to do that begins today, by putting care and discipline into decisions you make about your finances.


The Occupy Wall Street movement seems to have faded away, but it is fair to say that banks are still not very popular institutions. Fairly or unfairly, the prevailing impression many folks have is that bankers are fat cats who make their fortunes at the expense of ordinary people. However, instead of being mad at bankers, perhaps consumers should be mad at themselves. Time and time again, people let banks get the better of them through careless banking habits.

Here are six ways people willingly give up money to their banks when they don’t have to:

1. Savings account rates

Whether you use an online savings account or traditional brick-and-mortar one, savings account rates have dropped to nearly nothing. According to the FDIC, the average U.S. savings account pays a rate of 0.06 percent. That means a $10,000 savings account would earn just $6 a year in interest — hardly worth the trouble it takes to open an account.

Why are deposit rates so low? Part of it has to do with the Federal Reserve’s monetary policy of lowering interest rates to stimulate growth, but some of the blame has to go to consumer behavior. Banks generally have more deposits than they know what to do with these days, so most do not feel compelled to offer a higher interest rate to attract deposits. What exacerbates that problem is that consumers are all too willing to settle for mediocre rates.

Review up-to-date savings rates

While the average savings account pays just 0.06 percent in interest, some of the top savings accounts pay over ten times that. If consumer behavior were a little more rational, deposits would flow toward the top-paying banks and away from the low-paying ones. This would force those low-paying banks to raise their interest rates or risk a severe drop in deposits.

Unfortunately, too many bank customers fail to take an active approach to shopping for rates, and thus settle for less than a tenth of the interest they could be getting should they go for a high-yield savings account.

2. CD rollovers

Let’s give consumers the benefit of the doubt and say that they actually compare rates for certificates of deposit when they first open a CD. After that, though, too many people just let their CDs roll over automatically at the same bank, without even comparing to see if they could get a better rate somewhere else.

Face it — if the bank knows a CD is going to roll over passively, do you think they will go out of their way to give it their best rate? Different banks have specials on CD rates that come and go, so there is always a good chance of finding a better offer when your CD is due to mature. The nice thing about a CD is that, if you make the effort to shop for the best rate, you can then lock that rate in for the term of the CD.

Besides missing out on the best CD rates, people who let their CDs roll over passively are also missing an opportunity to reevaluate the length of their CD terms. The right term depends partly on interest rate conditions and partly on your financial situation, both of which are likely to have changed since the last time you chose a CD.

3. Mortgage refinancing

This is another situation where banks are more than happy to benefit from a home-court advantage. If they already have your business, they may feel less compelled to offer a better rate when you do additional business with them.

Certainly, it is worth including your current bank in any refinancing comparison you make. If they still own your loan (which is far from a sure thing), they have already approved of you as a credit risk and so may be more likely to approve you for refinancing.

At the same time, though, understand that mortgage rates can vary significantly from one lender to another. Also, risk assessment is a subjective thing, so some banks will feel more comfortable with you than others and thus offer you a lower mortgage rate. Don’t let the convenience of refinancing with the same bank cause you to be locked into paying more mortgage interest than you need to for years to come.

4. Checking account fees

Free checking used to be quite commonplace, but now it is the exception rather than the rule. Still, free checking is there for those who are willing to look for it, even with interest-bearing checking accounts or high yield checking accounts.

Monthly maintenance fees on bank accounts run to over $150 a year on average, so avoiding them can be a big win. Your best bet is to try online checking, since online accounts are more likely to offer free checking than traditional, branch-based accounts.

5. Overdraft protection

Protection sounds nice, doesn’t it? Who wouldn’t want to be protected? Well, when you look at the cost of overdraft protection, it may make you feel a little less safe and warm.

Overdraft fees typically exceed $30 per occurrence, and stories abound of people who bought a $3 cup of coffee and ended up paying a $30 fee. What’s worse is that you might make several transactions before realizing that you’ve overdrafted your account and so pay a multiple of that $30 charge.

By law, all banks, including FDIC insured banks, are supposed to leave people out of overdraft protection unless they actively sign up for it, but banks actively encourage people to opt into overdraft protection when starting an account. It may sound like a benefit, but the inconvenience of having a transaction denied is less damaging than racking up multiple $30 overdraft fees.

6. Credit card rates

You know how interest rates generally have come way down in recent years? Well, apparently credit card companies didn’t get the memo. The average rate paid on a credit card is about the same today as it was seven years ago. This means that, relative to other interest rates, credit cards have become a more expensive form of debt.

Rates can be especially high if your credit history is less than perfect. Remember that when you shop for a credit card, they are probably going to advertise their very best rate. That is not the rate you are going to get unless you have excellent credit, so before signing up for a card, find out what rate they would offer someone with your credit history.

Overall, it is a mistake to think of banks as if they were all pretty much the same. There are over 6,000 FDIC-insured banks in the US, which means you have plenty of choices. How you exercise those choices makes the difference between enriching yourself or enriching your bank.

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