Do you have an emergency fund or savings for any short-term goals? While money should be invested in stocks if you won't need it for a while, cash that you might need access to within five years or so should be kept in safe accounts, like a savings or money market account. 

The problem is, while you know it's practical to keep your emergency savings, a vacation fund, or a home down payment in these safe accounts, it can be downright painful to look at your statements and see the paltry returns your money earns.

Savings account interest rates remain pretty anemic, but some accounts are much better than others. So finding the right one is key to maximizing returns on safe investments. 

Woman putting money into savings account

Image source: Getty Images.

Switching your savings account could make a big difference 

Recently, finance website Value Penguin conducted a review of savings account interest rates for 2018 across major U.S. banks. Their research found vast discrepancies in interest rates, with some accounts with the highest rates paying as much as 145 times as much in interest than those at the bottom of the list. 

Specifically, a dozen big banks had interest rates starting as low as 0.01%, including some of the biggest names in the nation. Yet one more generous bank offered an annualized percentage yield (APY) of 1.45%. 

The difference can be surprising. If you had $10,000 invested and left the money in your account without adding anything to it, you'd end up with $10,002 after two years in an account at 0.01% interest, assuming account interest was compounded monthly. But, if you had $10,000 invested for two years at 1.45%, you'd end up with $10,294.07 if you added nothing, assuming again that interest compounds monthly. 

That extra $292 may make it worth switching your account over. 

Should you switch your savings account to earn higher returns?

While some banks pay more interest than others, you shouldn't necessarily always pick the savings account offering the highest rate. There are other factors to consider. For example:

  • What's the minimum balance required? If a high-yield savings account pays a more generous amount of interest but requires a $5,000 initial or ongoing balance, the account won't be very useful to you if you only have $2,000 saved. 
  • Are there fees? Fees of any sort can quickly eat up any interest you earn, especially since interest rates are low even on the most generous accounts. Find out all circumstances under which a savings account you're considering could charge you. If you can't avoid incurring new fees, you may be better off where you are. 
  • Will switching your savings account affect other banking relationships? Sometimes, it makes sense to keep all your accounts in one bank -- and not just for convenience, either. For example, you may have your savings account linked to your checking account to provide overdraft protection, or you may get your monthly account fees waived for direct deposits to savings or for maintaining a high combined balance in savings and checking accounts. If so, you don't want to switch and lose the perks you're currently receiving. 
  • How much hassle is involved in switching accounts? In most cases, it's easy to open a high-yield savings account online and to fund it with money transfers direct from your bank. However, if you have automated contributions to saving set up, it can be more trouble to make a change because you'll need to alter any financial documents or automated transactions that had the old savings account information.

The amount of money you have invested in savings will also help you determine if it's worth moving money over.

If your savings total is small, the difference in annual interest won't be very substantial. So you may not want to go through the process of researching banks and finding the highest rates. But if you have a large amount of savings, moving to a bank paying a better rate of return will make a bigger impact.

Finding the best bank for you

When you're thinking about switching banks, research your options carefully to find a trusted financial institution offering a reasonable rate of return on your savings account.

You can find our picks for the best high-yield savings accounts for 2018 so you'll have a good list to look at. By comparing interest rates, fees, and account requirements, you can find the perfect bank for you.