Is Your Money in the Right Savings Account? Here's How to Know

It's important to find the best home for your cash.

Savings accounts are a great place to stash money you have earmarked for emergencies. Why is this? The deposits you make to your account can't lose value, whereas when you invest in a brokerage account, you run the risk of your account balance declining from one day, week, or month to the next.

Not only are your principal deposits guaranteed in a savings account (up to $250,000 per depositor), but you can also access that money at any time. Want to take a $1,000 withdrawal to go on vacation? That's your choice. Need $2,000 to pay a home repair technician? That money could be in your hand that very day.

But if you've had the same savings account for quite some time, it may be a good idea to explore other options. You never know if there's a better place to put your money.

Is your savings account the most generous one out there?

For many years, savings accounts were paying such minimal interest that it almost didn't pay to worry about whether you were getting the best rate or not. But these days, savings accounts are starting to pay a lot more interest than they were before.

If you've been following the news, you may have read that the Federal Reserve has aggressively been raising interest rates in an effort to slow down the pace of inflation and give consumers some much-needed relief. The downside of that is that borrowing is already getting more expensive. Consumers looking to take out auto loans, mortgages, or personal loans in the coming months could easily get stuck with higher borrowing rates due to the Fed's actions.

But the upside of the Fed raising rates is that savings accounts and certificates of deposit are now paying more interest. And so it's important to take advantage of higher rates by finding a savings account that will pay you more generously.

In fact, figuring out whether it pays to move your money is simple. If your bank is paying 1.1% interest on your savings but there's another bank paying 1.6%, then it could make sense to make the switch. After all, if you're going to keep money in savings, you might as well earn the most interest you can.

These days, it especially pays to look at the interest rates online banks are paying. Because online banks don't have the same operating costs and overhead as brick and mortar banks, they're often able to offer consumers higher interest rates on their savings.

Don't be afraid to make a change

Change can be hard. If you've been with the same bank for a long time, you may be hesitant to move your money. But if you're looking at a much higher interest rate elsewhere, then it's worth making that change.

Another option is to keep a small amount of money in your current bank, but move most of your savings over to another bank to take advantage of higher interest rates. As it is, the interest you're paid in a savings account might pale in comparison to the return you might generate by investing in a brokerage account. But you need the safety of a savings account for your emergency cash. That doesn't mean, however, that you shouldn't do what you can to eke out as much interest as possible.