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Banking

Best Savings Accounts for Kids

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Piggy banks are fun for small change, but if you want to teach your kids important lessons about managing money and the power of compound interest, get them their own savings account. While your local bank branch probably offers more than one savings account product, you might consider looking online for one that’s designed with children in mind.

To aid in your search, we have chosen six savings accounts tailored for kids from a selection of nearly 100 kids’ savings options offered at banks and credit unions around the country. We based our selections on how well they met these five criteria:

  • Competitive annual percentage yield (APY): Accounts should demonstrate the rewards you can get by saving your money, and a competitive interest rate helps achieve that objective.
  • Low fees: Kids don’t need to lose their money to fees, so finding an account with zero fees was important.
  • Low minimum deposits: Most kids don’t have a large amount of money to save when they first open an account. Having a low minimum deposit requirement can help them get started quicker.
  • Broad geographical reach: Banks and credit unions need to be available to a large geographic market, with extra points for physical locations where kids can go and deposit cash and coins.
  • Great educational tools: Savings accounts that are geared to kids should have some educational tools to help them learn about what it takes to achieve financial success. Bonus points if the tools are fun, too.

 

Best overall savings account for kids: Capital One

Kids Savings Account from Capital One Capital One’s Kids Savings Account has all of the features you’d expect to see in a savings account for adults but with the additional feature of parental controls, which makes it a great overall solution for kids of all ages. The account earns 0.50% APY, has no monthly fees and can be opened with $0. You can set it up the account, and make your initial deposit at a later date.

The Kids Savings Account parental controls allows parents to sign into the account under their own usernames and passwords to help their children manage their funds. Parents always control transfers in and out of the account, offering good balance between independence for the young holder and parental oversight. Kids get to view their balance and watch their money grow.

Capital One lets you create an automatic savings plan linked with other accounts, so you can automatically transfer your child’s allowance into their Kids Savings Account. When it comes to geographical reach, Capital One has approximately 500 branch locations, as well as a great mobile banking app, which allows you to deposit checks and check balances.

Capital One Kids Savings Account
APY: 0.50%
Monthly Fees: $0
Minimum Opening Balance: $0

SEE DETAILS Secured

on Capital One’s secure website

Member FDIC

Best savings account for college savings: Citizens Bank

CollegeSaver from Citizens Bank (RI) If you want to be rewarded for consistent savings, the Citizens Bank CollegeSaver account has a bonus you might consider. If you open the account before your child is six and make a deposit of at least $25 each month until your child turns 18, Citizens Bank will give you a $1,000 bonus (the current account APY is a low 0.05%). You can also open this account if your child is between 6 and 12 years of age, but the minimum monthly deposit will be $50 and opening deposit is $500.

If you were to open the account today with an initial deposit of $25 upon the birth of a child (and assume the current APY held for 18 years), and then deposit $25 a month for 18 years, your $5,400 investment would accrue $24.48 in interest. Add the bonus and you’ll end up with $6,449.48. The bank doesn’t put any stipulations on how the money can be spent, so you can use the balance for college or any other financial needs.

Citizens Bank CollegeSaver
APY: 0.05%
Monthly Fees: $0
Minimum Opening Balance: $25 for children under six years old; $500 for children age six to 12

SEE DETAILS Secured

on Citizens Bank (RI)’s secure website

Member FDIC

Best savings account for a young child: PNC Bank

S is for Savings from PNC Bank If you want to engage your child with educational tools, PNC’s S is for Savings account offers a lot. Granted, this account offers the lowest APY of the banks that made this list, but it makes up for it with its interactive online banking experience.

The Learning Center features Sesame Street characters that will help them learn basic money concepts. The site has fun activities you and your child can do together.

Features include the ability to set up automatic savings deposits that help them see the benefits of having a savings routine. Kids can work towards goals and learn about the three components of money: saving, sharing and spending. As your child gets older, you may choose to transfer their accumulated balance to a savings account at a bank that offers a higher interest rate.

PNC Bank’s S is for Savings
APY: 0.01%
Monthly Fees: $0 for account holders under 18
Minimum Opening Balance: $25

SEE DETAILS 

Member FDIC

Best savings account for teens: Alliant Credit Union

Kids Savings Account from Alliant Credit Union When your child turns 13, Alliant Credit Union considers them to be a young adult, offering their High-Rate Savings Account with a 1.20% APY and no monthly fees. For teens who want to set savings goals, the credit union allows them to set up supplemental accounts that can be earmarked for specific items, such as saving for a new car.

What makes this a great option for a teen is that Alliant also offers an interest-paying teen checking account for kids ages 13-17. The checking account earns an APY of 0.25%. The two accounts can be linked and both will earn your teen interest. Alliant also refunds up to $20 per month in ATM fees if the teen uses out-of-network machines.

To open an account at Alliant Credit Union, you must be a member. Membership is open to employees or former employees of partner businesses or organizations. Or you can join by making a $10 donation to the Foster Care to Success Foundation.

Alliant Credit Union High-Rate Savings:
APY: 1.20%
Monthly Fees: $0
Minimum Opening Balance: $5

SEE DETAILS Secured

on Alliant Credit Union’s secure website

NCUA Insured

Best APY for a kid’s savings account: Spectrum Credit Union

MySavings from Spectrum Credit Union Spectrum Credit Union currently offers the highest interest rate on the market for a kid’s savings account, but only on a relatively limited balance. Spectrum’s MySavings account earns 7.00% APY on account balances up to $1,000, making for a rate that’s higher than many CDs. Balances over $1,000 earn the regular savings rate, which is 0.40%. A high interest rate can help get kids excited about savings as their balance will grow quicker.

Spectrum Credit Union currently has branches in six states, but deposits can be made nationwide through the Credit Union CO-OP Shared Network. Membership is open to anyone by joining the Contra Costa County Historical Society ($15 membership fee) or the Navy League of the United States ($25 annual membership fee).

Spectrum Credit Union MySavings
APY: 7.00% for the first $1,000; 0.40% on balances above $1,000
Monthly Fees: $0 for account holders under 18
Minimum Opening Balance: $0

SEE DETAILS Secured

on Spectrum Credit Union’s secure website

NCUA Insured

Best online tools for a kid’s savings account: Capital One

Kids Savings Account from Capital One Kids are digital natives, and that makes a kid’s savings account’s online banking features extra important. In addition to being our pick for best overall savings account for kids, the Capital One Kids Savings Account offers a great selection of online saving and budgeting tools that will keep kids engaged and informed.

One of the best features is the ability to create additional savings accounts and set a target goal for each account. For example, you child may set a goal for holiday gifts, another goal for a new bike or car and another goal for vacation money. They can even give each account a nickname, such as “My Wheels Fund.”

Capital One has a full suite of online tools for your child to track their progress and success, helping to keep them focused on their goals. Capital One also offers standard features on its mobile banking app, some of which are available for kids, including the ability to check their balance or make a mobile deposit.

Capital One Kids Savings Account
APY: 0.50%
Monthly Fees: $0
Minimum Balance: $0

SEE DETAILS Secured

on Capital One’s secure website

Member FDIC

Why your kid should have a savings account

It’s never too early to start teaching your kids about money, and a savings account is a great tool to help accomplish this aim. According to the 9th Annual Parents, Kids & Money Survey by T. Rowe Price, 55% of parents said their child has a savings account, but just 23% of kids said that they talk to their parents frequently about money. Parents who discuss financial topics with their kids at least once a week are more likely to have kids who say they are smart about money than than those who do not have a discussion with their children.

Savings accounts show kids the value of saving at an early age. They get to watch their money grow as compound interest work its magic, and they can set short- and long-term goals for the money they save. The reward of achieving the goals will teach life lessons on patience and planning. Once you open an account for your kids, share money management tips with them, things like “paying yourself first” by saving a portion of gifts and allowances they receive instead of spending it all.

When you teach your child good money habits early on, you help set them up for success later in life. Putting your child on the path for financial responsibility and independence by choosing the best savings account for kids could be the greatest gift you can give them.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Personal Loans

What Is APR and How Do You Calculate It?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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When you’re shopping around for credit, you’ll see the term APR thrown around. APR stands for annual percentage rate, and it’s a better representation of your cost for borrowing compared to the interest rate.

When comparing a debt’s APR versus its interest rate, you’ll often find that they’re different, though they’re both expressed as a percentage. Where the interest rate is what the lender charges you for borrowing funds, the APR takes into account the interest rate plus other costs and represents these fees as a yearly rate.

What is APR? A deeper dive

When you take out debt, such as a personal loan, you’ll repay the amount you borrowed plus fees. In addition to the interest rate, the APR may include other fees a borrower must pay to take out the loan. With a personal loan, this is likely to be an origination fee, which can range from 1% to 5%.

In order to know how to find the APR, look at your loan agreement. The federal Truth in Lending Act requires lenders to disclose the APR for any form of credit so borrowers understand the true cost of any loan. You’ll also find many lenders disclose upfront the APR ranges they charge. The better your credit and financial health, the lower the APR you can receive.

How do you calculate APR?

Calculating a loan’s APR involves a few steps. To learn how to calculate APR, you can use the formula above. You’ll need to gather the following information:

  • Loan amount
  • Interest owed over the life of the loan
  • Fees
  • Number of days in the loan term

Now that you have the formula and the information you need to calculate, let’s walk through a hypothetical situation to understand and see how the APR works.

Calculating your APR

Let’s say you are interested in taking out a $5,000 personal loan and want to compare rates. One lender is offering an interest rate of 8% with a 3% loan origination fee for a term of 12 months.

To determine your APR you need to add the fees and interest to the loan amount, calculate the monthly payment that includes the fees as part of the loan and then convert that amount into an interest rate.

With our $5,000 personal loan example:

First, calculate the interest and fees.
The origination fee would be $150 and the total interest is $400.00, for a total of $550.00.

Take that number and divide it by the loan amount.
$550.00 / $5,000 = 0.11

Next, divide the result by the term of the loan, calculated in days.
0.11 / 365 = 0.00030137

Then multiply that by 365 in a year.
0.00030137 x 365 = 0.11

Finally, multiply that by 100 to get the APR.
0.11 x 100 = 11.00%

Seeing the APR in action

Let’s now say we’re shopping around for different lenders. Take a look at how different interest rates can impact the APR and your monthly payment if your loan has a 36-month term for which the interest rates are different. The $5,000 loan has a 5% origination fee, so what would the APRs be for all three options?

APRs at a glance

Interest rate

5%

9%

13%

Loan fee*

$250

$250

$250

APR

8.46%

12.54%

16.63%

Monthly payments

$149.86

$159.00

$168.47

*Fee assumes 5% origination fee on $5,000 loan

Fixed APRs vs. variable APRs

A fixed APR is an annual percentage rate that is set for the term of the loan, while a variable APR is a percentage rate that can fluctuate. Fixed rates don’t change over the life of a loan — this means that if you take out a $5,000 personal loan with an 8.00% fixed interest rate, the rate will stay the same until the loan is paid off, no matter what happens in the economy.

A loan with a fixed APR has some advantages — offering a predictable payment, for example — and this can be helpful for planning a budget. Loans that typically have a fixed APR include:

  • Personal loans
  • Mortgages
  • Auto loans

Variable APRs are tied to a market index, such as a prime rate that is set by the Federal Reserve. A loan with a variable APR can be a good choice during an economy with a low prime rate, especially for borrowers who plan to pay it back in a short amount of time. In times of volatility, however, a variable APR can result in higher payments. Variable APR loans can include:

  • Most credit cards
  • Adjustable rate mortgages
  • Adjustable rate personal loans

What is the average APR for personal loans?

Before you take out a personal loan, you’ll need to understand how they work. The average APR among LendingTree users with a 720-plus credit score who received a loan offer in Q4 2019 was 7.63%. However, the average APR rises sharply for those with lower credit scores. That’s because your credit score signals to lenders how trustworthy you may be as a borrower — and the higher your score, the better.
Your credit score is based on factors such as:

  • Your payment history
  • Current debt balances
  • Length of credit
  • Types of credit
  • Number of new accounts

Lenders will also look at your debt-to-income ratio as well as your annual income.

The loan term may also impact your APR. Loans with shorter terms, such as 12 to 24 months, are generally offered at lower rates than longer-term loans. Plus, rates can also vary depending on the loan amount.

FAQ on APRs

Annual percentage rate. It is a yearly rate that represents your cost to borrow.

The APR definition is the true cost of borrowing money, including the interest rate as well as any required fees or charges.

The interest rate is the percentage of the borrowed principal charged by the lender for the use of its money. APR includes the interest rate as well as any fees or charges, expressed as a percentage.

APY stands for annual percentage yield, and it is the amount of interest earned through a savings or other type of investment account. The APR is the annual percentage rate that a borrower is charged on a loan or other type of credit account.

Credit cards can have various APR rates, based on the type of card and how you borrow with it. They include:

  • Balance transfer APR: The rate you pay on a balance transfered from another credit card.
  • Cash advance APR: What you’ll be charged if you take a cash advance on a credit card, which begins to accrue on the day the advance is taken.
  • Introductory purchase APR: A lower-than-normal APR you pay on purchases during a special introductory period.
  • Penalty APR: A higher APR you will be charged if your credit card payment becomes delinquent.
  • Purchase APR: This is the APR you pay on your credit card purchases.

A good APR will depend on your personal situation, including your credit history and financial health. Lenders use this information when extending credit card APR offers. In addition, the type of card you get, such as a card with no annual fee or that comes with rewards, can impact the APR you are charged.

With this in mind, the average minimum APR for all new card offers is 16.77%, according to CompareCards. The lowest minimum APR is for a secured card, which is 14.7%. The highest minimum is for a student credit card, at 22.2% APR.

APRs on personal loans can vary depending on your personal credit history. But they also can vary by lender, making it important to shop around when looking for a loan. MagnifyMoney’s personal loans marketplace offers an easy way to find low-APR loans by comparing rates as well as fees and requirements for qualification.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Banking

Checking vs. Savings Account: What’s the Difference?

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A checking account and a savings account are both essential for managing your personal finances. Checking accounts are for day-to-day spending, while savings accounts are for stashing money for the future and earning interest. Understanding the difference between them will help you better manage your money and meet your financial goals.

Checking vs. savings account: Basic features

Checking accounts are where you keep money intended to meet your everyday spending needs. In times past, you would access money in your checking account using paper checks, and balance your budget in a checkbook. Checks are still around, but today most people use debit cards and mobile apps to access and manage money in checking accounts.

There’s generally no limit to transactions, and checking accounts generally earn low or no interest, with the average account earning 0.06% APY.

Savings accounts are intended for saving for the future or for creating an emergency fund. While rates vary, the average account earns 0.09% APY. Savings accounts offer minimal access to your funds due to Regulation D, a rule put into place by the Federal Reserve that mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle.

Both checking and savings accounts can be protected by the Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Administration (NCUA). The FDIC and NCUA insure bank accounts up to the legal limit per depositor, guaranteeing the safety of your money in case the bank or credit union fail.

Checking AccountsSavings Accounts
Main purpose
Routine deposits and withdrawals, used to meet day-to-day cash needsTo save money for the future and earn interest on the balance, minimal access
Withdrawal limits
Unlimited withdrawals*6 convenient withdrawals per month
Interest earned
Average APY of 0.06% as of February 2020 — much higher rates are available if you shop around. Average APY of 0.09% as of February 2020 — much higher rates are available if you shop around.
Minimum balance requirements
Generally zero, but some accounts may require a minimum balance to avoid feesFrom $100 to as much as $2,500. A few accounts can require much more.
Common features
  • High liquidity: Unlimited withdrawals
  • Lower interest rates
  • Debit cards and checks
  • Low liquidity: Limited withdrawals
  • Higher interest rates
  • Some offer debit cards and checks
Fees
There may be fees for monthly maintenance, overdrafts, paper statements, inactivity, returned items, card replacements, account closure, international withdrawals, third-party ATM withdrawalsSeldom charge fees, although some accounts will charge you if you fall below a required minimum balance

*Check the terms & conditions of your account for any limitations the financial institution may impose.

Checking account features

Checking accounts are designed to be convenient for everyday access, via checks, debit cards, mobile apps and online transfers. You can deposit or withdraw money at a branch office or through an ATM, although some checking accounts put a cap on the amount you can withdraw each day. Writing checks or making purchases with a debit card very seldom has daily limits.

Some checking accounts charge monthly maintenance fees, but they are easily waived if you maintain a minimum balance or set up recurring direct deposits. Other fees that can be charged are for holder actions, such as overdrafting the account, requesting paper statements, using a third-party ATM, requesting debit card replacement or closing an account shortly after opening it. By being diligent with your usage, you can avoid checking account fees.

While banks don’t generally pay much in the way of interest on checking accounts, you can find interest-bearing accounts that pay as much as 4.00% APY if certain requirements are met.

Checking account features may include:

  • Easy access
  • ATM/debit cards and checks
  • Online banking and mobile apps
  • FDIC insurance
  • Earns some interest
  • Online bill payments
  • Bonuses and rewards
  • Overdraft protection

Savings account features

A savings account is intended to be a place to build wealth or save for your financial goal over time, while still offering a degree of liquidity. Because withdrawals are limited in many cases, savings accounts are meant to hold money you don’t need easy access to.

Savings accounts have fewer fees than checking accounts, and they generally earn a higher rate of interest. Rates on accounts can fluctuate depending on various factors, such as when the government adjusts the federal funds rate. And the rates offered vary greatly among accounts, so it’s important to shop around to find your best deal.

In addition to traditional savings accounts, you can open a variety of other accounts that work similarly to savings accounts. These include online savings accounts, money market accounts, certificates of deposit, health savings accounts (HSAs) and flexible spending accounts (FSAs), college savings accounts and a variety of retirement accounts. Due to their focused purposes, some of these account types have limited uses or availability.

You can move money in and out of your savings account through direct deposits and withdrawals, or transfers between deposit accounts, which is done via Automated Clearing House (ACH). ACH transfers generally take one to two business days to clear.

Savings accounts can offer several features:

  • Higher interest rates, in many cases
  • Low to no fees
  • Debit cards and checks, in some cases
  • Online banking and mobile apps
  • FDIC and NCUA insurance
  • Automated transfers from other accounts

How Fed Regulation D affects your savings account

The Federal Reserve’s Regulation D limits the number of transfers and withdrawals you can make in certain types of accounts. The rule has its roots during the Great Depression era to set monetary policy. Currently banks must maintain in reserve 3% of their total liabilities over $16.9 million and 10% of total liabilities over $127.5 million.

For savings accounts, Regulation D mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. If you exceed the transaction limit, the bank may charge you a fee, deny future transactions, convert it to a checking account or even close your account.

However, the rule applies only to certain transactions, such as:

  • Automated, pre-authorized transfers, such as overdraft protection or automated bill payments
  • Online account transfers
  • Phone transfers or withdrawals
  • Debit card transactions

You can avoid getting into trouble with Regulation D by accessing your money with transactions that are not limited, such as:

  • Withdrawals made in person at a local branch or ATM
  • Withdrawal requests made by mail
  • Withdrawal requests made by phone with funds mailed to the depositor instead of being directly disbursed

Checking vs. savings account: How to choose

Selecting a checking or savings account depends on your individual goals and objectives. In most cases, it’s necessary to have both types of accounts. For minimal interest but convenience and frequent access to cash, a checking account is the way to go. Savings accounts are better suited for saving over the long term.

Having both types of accounts can be quite complementary to paying everyday expenses and also keeping an emergency fund or meeting long-term savings goals. Sometimes, banks will waive a monthly fee if you link your checking and savings account. The drawback to this is that you might not find your best checking and savings account interest rates and terms by using the same bank.

In short, it’s best to do your homework and shop around for the checking account versus savings account with higher interest rates and lowest bank fees. There’s no one-size-fits-all solution, so it pays to find the combination that best suits your objectives and lifestyle.

Find savings and checking accounts with high APYs

Rates vary so it’s important that you shop around for the highest APYs. Here are some of your options.

Top checking accounts in January 2020 with no minimum balance

Financial InstitutionAPY
Empower0.25%
Axos BankUp to 1.25%
Aspiration1.00%
nbkc bank0.75%
Ally Bank0.50%

Top savings accounts in January 2020

Financial InstitutionAPYMinimum Balance
Blue Federal Credit Union5.00%$25
CommunityWide FCU0.80%$1
Synchrony Bank1.30%$0
Goldman Sachs Bank USA1.30%$0
Barclays1.30%$0

Avoid checking or savings accounts with fees

When shopping around for a bank or credit union for your checking or savings account, make sure to review the fine print to look for fees. If the financial institution charges a maintenance fee, keep shopping. Never pay fees, there are simply too many good options that won’t charge you to hold and access your money.

Do I need checking and savings accounts at the same bank?

The simple answer is no, but there are reasons for and against the practice. Having your checking and savings accounts at the same bank can simplify money management by putting your balances within the same online banking dashboard or statement. You can also usually transfer money between accounts instantly.

However, you may not find your best options within the same financial institution. For example, the checking and savings accounts currently paying the highest interest rates are not from the same bank. If you want to maximize the interest or features you want, you may need to open accounts at different banks or credit unions. The extra steps may pay off in higher earnings.

Do I need multiple savings accounts?

If you have more than $250,000 in savings, the answer is yes. The FDIC and NCUA insure deposit accounts at a given institution up to the legal limit in a given ownership category, such as a checking, savings or retirement account. If you have more than $250,000, you might want to distribute your money between banks or ownership categories for full protection.

What about cash management accounts?

If having separate checking and savings accounts proves to be too much work, you can consider a cash management account, which can be the best of both worlds. A cash management account combines the high interest rates of a savings account or certificate of deposit with the accessibility of a checking account. These hybrid accounts are offered by online-only banks or institutions. Wealthfront currently pays a 0.35% APY on its cash account with unlimited transactions and no minimum balance.

Whether you choose a checking, savings, cash management account or combination, make sure you shop around for rates that will fit with your financial goals and understand the terms and requirements. The purpose of a bank account is to keep your money safe while you build wealth. And your account should be furthering your goal instead of depleting it.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.