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Start Here: “The Ultimate Guide to Personal Finance”

Best savings account for 2016

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This week, I’m sharing my favorite accounts with you.

In my last note, I talked about why American Express Starwood card is the best all-around credit card and the one I personally use.

Today, I want to talk about another crucial piece of your personal finance system: your savings account.

Savings accounts really matter because they’re where you save for mid-term and long-term goals: your wedding, house/car down payment, vacation fund, etc.

Instead of intermingling these funds with general spending money in your checking account (where it inevitably gets spent) it’s psychologically important to set mid-term money aside in its own, separate savings account.

But beware the big banks. Extortionate fees and terrible customer service make them a bad deal for most people. As I write in chapter two of my book:

“I would not encourage anyone to use a standard Big Bank savings account. Online savings accounts let you earn dramatically more interest with lower hassle. And because you’ll primarily be sending money there, not withdrawing it, what does it matter if it takes three days to get your money?”

There are plenty of good online savings accounts to choose from, but after evaluating many options, here is…

The best savings account is…

I use Capital One 360 (formerly ING Direct).

This is the account I recommended in my book, and it’s still the account I use today, years later.

Here’s why.

The psychology of sub-savings accounts

I mentioned how psychologically important it is to have sub-savings accounts, rather than one lump “savings” area.

Check out my actual sub-savings accounts:

You see why this matters?

If your friends call you up and say “Hey dude, let’s roll to Vegas this weekend,” you’re not going to be like, “Hang on guys…let me initiate a transfer from my ‘down payment’ sub-savings account, which should take 24-48 hours.”

You could…but you won’t.

This is a GOOD THING.

Using your automated personal finance system, I use monthly automatic transfers to funnel money into each of my sub-accounts. Now that these transfers are in place, I’m getting closer to each of my goals automatically, month after month, without having to remember to set money aside.

This is precisely how people get rich automatically. Because when you don’t see the money — when it’s automatically withdrawn from your checking account and shunted to specific savings goals — you will never miss it. However, a few months later, you’ll be amazed at how fast you’re accomplishing your goals.

By the way, it’s possible to simulate sub-savings accounts with any savings account (for example, by manually creating your own “subaccounts” in Excel.) But I like Capital One 360 because it just does it for me. Why give yourself another financial chore to think about? I cover the use of sub-savings accounts in more detail in my blog post Using Sub-Savings Accounts For Unexpected Expenses. It’s an incredibly powerful way to make your savings more streamlined and purposeful.

Other benefits of the Capital One savings account

  • No fees, no minimums
  • Good interest rate (see below)
  • You can do everything online in an ultra-simple interface
  • No annoying upsells sent via postal mail = paper cuts
  • Links to your checking account (even if not in ING) via electronic transfer

One thing about the interest rates these banks pay. A lot of people ask about the 4-5% interest rate that ING and other high-interest banks used to pay, which I quoted in my book. Unfortunately, those interest rates are variable, meaning they change with the economy. Do NOT waste your time chasing rates. A 1% difference on a balance of $10,000 is $8.33/month, hardly worth your time.

Let me say it again. DO NOT BE A STUPID RATE CHASER. If you write me and say, “But Ramit, XYZ bank has 0.2364% higher interest rate. LOL! U R WRONG!” I am going to (1) mock you, (2) unsubscribe you, and (3) hate you.

Find a bank you trust, stick with it, and get on with your life.

NEXT STEPS: Open a savings account

To open up a Capital One 360 savings account today, click here.

By the way, if you’re wondering if I still endorse this account, click here to see my thoughts on the ING-to-Capital-One transition.

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78 Comments on "Best savings account for 2016"

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Margaret
Margaret
5 years 3 months ago

Have to second the recommendation for ING Direct; I love them.

But, Ramit, I thought you had said in the past that you weren’t planning on buying a home in the foreseeable future. Have your plans changed, if you are now saving for a down payment?

Rich
Rich
5 years 3 months ago

ING is up for sale, at least their banking division in the US. Not knowing who will end up with the ING assets, I moved over to Ally. I was very happy though with ING while I was there. Please post a follow up if you find a different savings bank that you like.

Rich
Rich
5 years 3 months ago

It is not really a concern about ING going away as much as which companies may be taking over. GE and Citi are 2 companies I would rather not deal with if possible.

Margaret
Margaret
5 years 3 months ago

Wouldn’t the deposits still be FDIC insured? If so, why should I worry? There’s no indication as yet that ING’s policies will change if they are bought out.

Rich
Rich
5 years 3 months ago

Yes, they are FDIC insured. It is that I don’t want to deal with the companies that are possibly buying ING. Instead of waiting to see, I just proactively switched. I was more curious as to Ramit’s thoughts. It really doesn’t matter though in general, as long as you are saving and it is FDIC insured. It is whatever works for you as an individual.

Sarah
Sarah
5 years 3 months ago

The point is that it’s not worth switching to ING if the transactions costs of opening/closing accounts are high for you. It’s kind of like purposely not automating something.

One of the companies that is rumored to be “far along” in takeover negotiations with ING is not as friendly (Ally, formerly GMAC). There’s no reason to expect them to maintain the same or provide better terms. It’s probably better for people to switch to a bank that is maybe not as good as ING but will probably be around for longer.

Sarah
Sarah
5 years 3 months ago

I had a flashback this morning–when ING took over NetBank (where I had opened some accounts in 1998), ING did away with some of NetBank’s sweetest perks, like free overdraft on linked accounts. Bank takeovers usually don’t benefit the customers directly.

Lang
Lang
5 years 3 months ago

Hey Ramit,

This is great an all for you American People.

But How about us Canadians?

Yes, we have ING Direct Canada, so the Savings Account is good.

But How about the credit card and the chequing account?

Gregorydee
Gregorydee
1 month 12 days ago

The only problem I find with ING living in Canada are in the lack of customer support, simply because there is no walkin tellers or real hands on assistance. http://yep.it/Insoles

Jason
Jason
5 years 3 months ago

Ramit,

I have an ING account (with sub accounts) and I love it. I have one question though: Do you know of a way to set up one transfer from a checking account to the ING savings account and have it distribute that deposit across all the sub accounts by a percentage? Right now, I’ve been transferring money from checking to savings and then manually distributing the money to the sub accounts. I’d love to have this done for me automagically so there’s even less to think about.

Thanks for your help and your wonderful blog!

Dave
Dave
5 years 3 months ago

You can set up automatic bi/weekly/monthly transfers of a set amount to each individual sub-account. This is what I do. If you wanted to put in a variable amount each week, then I wouldn’t know how to do that or if it’s even possible.

Dave
Dave
5 years 3 months ago

Look for “Automatic Savings Plan” under the My Accounts tab.

BarbaraB
BarbaraB
5 years 3 months ago
Don’t be confused by Ramit’s use of the term “sub-account” like I was. They are not sub-accounts – they are independent accounts with different account numbers. If you transfer to the “main” account and then distribute to the other accounts, you may well run afowl of the 6 withdrawals a month limitation. I used to think the way you are and got a nasty-gram from ING – if I did it again they’d be required by law to terminate my accounts. A phone call with customer service corrected my thinking and I rearranged the withdrawals/transfers from my checking account so… Read more »
Jason
Jason
5 years 3 months ago

Thank you everyone for the assistance.

BarbaraB was right. I was thinking that I could transfer one lump sum to ING from BOA and then distribute it to the sub accounts. I will instead setup individual transfers from BOA to each individual sub account for my savings plans. Thanks everybody!

satish
5 years 3 months ago

I am also a big fan of ING Savings account which I have been using for a coupleo of years now. Another advantage of ING savings is that you can see your investment account such as IRA at the same time. It makes it easier to automatically invest from your account.

Justin @ MoneyIsTheRoot
5 years 3 months ago

I do agree, we certainly aren’t stashing money away in savings accounts to get rich off of the interest rates… a quarter of a percent ain’t gonna do much for you! I like automating finances, to a degree. I wrote an article on this not long ago, laying out the different aspects of my financial web that I like to automate, and those that I do not. I have been burned by phone companies and credit card companies more than once, which gives me a little hesitation when automating those types of bills.

Daniel
Daniel
5 years 3 months ago
Ramit, I’m reading your book right now and enjoying it. I’m on the chapter on starting a 401(k) and a Roth IRA. As far as a savings account goes, I have a Bank of America Savings Account. I put 10% of my bi-weekly paycheck into the savings account which amounts to about $150 every two weeks. I would love to subdivide my savings as you discuss, but with only $300/month, it seems like it will be difficult to put considerable amounts of money in each subcategory. What do you suggest? Putting 10% away and planning to start putting another 5%… Read more »
Cory Huff
5 years 3 months ago

Been using the ING Orange account for more than a year now. It’s pretty fantastic. Our savings automation is going very well. Thanks for the great ideas Ramit!

Jim Mortensen
5 years 3 months ago

Ramit,

What about SmartyPig.com ?

It has all of the benefits you listed, a higher interest rate, AND is more designed to push you to your financial goals goals rather than being a general savings account.

jhardesty
jhardesty
5 years 3 months ago
I second Jimmys question. I’ve been using smartypig for awhile. They were taken over by compass bank a while back but they’re options for using the money you save is impressive. You can get cards to a wide variety of companies and they’ll even add on a certain percentage [usually around 4%]. So for example, if you have a savings goal for a trip, you can choose to cash out with a travelocity card and they add another 7%. Or you can choose half on a card half cash. its pretty good if you have very specific goals [trips, furniture,… Read more »
Chris
Chris
5 years 3 months ago

Do you think this may have a negative impact on this account?

“Capital One Wins ING Direct USA ”
http://online.wsj.com/article/SB10001424052702304186404576389710699747604.html

David
David
5 years 3 months ago

Does all this apply to your business finances too? Same CC, Savings & Checking?

Stan
Stan
5 years 3 months ago

I’ve been with ING for over 6 years now and always been quite happy with them, decreasing interest rates notwithstanding. Can’t say that I am thrilled with the idea of Capital One taking over, but I’ll wait to see how things develop before making any further decisions.

Ryan K
Ryan K
5 years 3 months ago

I have been using a service called Smarty Pig which is similar to ING, and offers the same ways to subdivide savings accounts with goals. Plus they have a refillable rewards card. I think it’s a solid alternative. One thing is that it’s somewhat difficult to actually get money out without transferring the entire amount saved in a goal.

Paul
Paul
5 years 3 months ago
A minor rant, but taking a wait-and-see approach: There are 2 companies that, 10 years ago, I swore not to do business with: Chase, and Capital One. Note: BofA wasn’t as bad in 2000 as it’s been in recent years. Since then, Chase has bought 2 of my credit cards, closed 2 of those, and consolidated the credit into one card. They killed my credit history (and credit score) in the process. They also bought my savings and checking accounts through Washington Mutual. Since then, however, I have not had a single problem with them, and I actually like Chase.… Read more »
tads
tads
5 years 3 months ago
Hate if you want, but betterment.com is a much better online “savings” account. Technically you are investing, but they boil it down so simple that high school students could do it. The interest rate that they get is phenomenal, and the connection to your checking account makes it just as simple to deposit or withdraw. The only downside to this is that there are no sub-savings account. If you would rather have upwards of 5 times the return on your money (I had about 8% last year) you could just keep track of your sub accounts in a spreadsheet.
Margaret
Margaret
5 years 3 months ago

The higher interest rate is all very well and good, but the stock market is highly volatile in the short term. I wouldn’t want our emergency savings in an account highly dependent on stock returns because my husband might well lose his job at the same time as the market drops, leaving us in a perilous position.

For relatively short term savings (new cars, emergency fund, saving for car insurance, etc.) I prefer a more secure, but lower return.

John
John
5 years 3 months ago

Ramit

Where do you store your emergency fund? Is it in another savings account with quicker accessibility?

Any plans to write a post for money market funds, online brokers, CDs, etc?

Ryan776
Ryan776
5 years 3 months ago
Hey Ramit… Great post man! I totally agree with this thought process. It makes everything so much simpler when you can look at your sub-savings account and see exactly how much money you have in each category, as opposed to having one savings account and tracking it in an excel sheet. Because every time you make a deposit, then you’d have to remember to make a note in your excel sheet to remind you what that deposit was for. So if your car windshield needs replacing – just take the money out of the car maintenance account and there’s still… Read more »
PG
PG
5 years 3 months ago
In response to comment number 3 [it seems there is no way to reply directly to that comment]: Ramit, I agree that there is no reason for ING Direct users not to wait and see what changes as a result of the sale to Capital One. It’s not like anything has gone wrong yet, and ING’s features are great. But you’ve said yourself in a Yahoo Finance interview with CreditCards.com that ” I also like naming names for excellent and terrible cards,” and went on to say “Capital One : I would never use their cards. I hear horror story… Read more »
Ian
Ian
5 years 3 months ago

Ramit,
I really dig your three recommendations, but I was wondering if the awesomeness of the credit card and accounts, is true when traveling overseas (international ATMs, credit card purchases, etc). I am planning on doing some substantial international traveling this upcoming year, so I would love to hear your thoughts. Thanks.

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[…] at I Will Teach You To Be Rich suggests his favorite savings account, checking account and credit card. I am in the market for all of these accounts so I appreciate the […]

trevor
trevor
5 years 3 months ago

So are these subaccounts with ING actually separate accounts with separate account numbers?

Lexi
Lexi
6 months 21 days ago

Yes

Samantha
Samantha
5 years 3 months ago

Do you have any thoughts about PNC’s Virtual Wallet Program? The Orange Savings Accounts w/ING Direct and the Virtual Wallet Program appear to be very similar.

Thank you.

Dawn Abraham
5 years 3 months ago

Great article I am going to look into this. Even though I’m happy with my savings account this sounds like it has more to offer. You never know when your going to find some great information when your not even looking for it.I just happened onto your site from something you posted. That’s the great thing about the internet it really informs you about so many great things that before we would have to rely on word of mouth from a limited amount of people.

Jon
Jon
5 years 3 months ago

Would also like to hear some opinions on the PNC virtual wallet. After reading through all the comments I was surprised there were none.

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[…] the Capital One acquisition will mean for ING Direct. As you know, when I recommended my favorite savings account, checking account, and credit card, I named ING Direct as the savings account that I love and […]

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[…] the Capital One acquisition will mean for ING Direct. As you know, when I recommended my favorite savings account, checking account, and credit card, I named ING Direct as the savings account that I love and […]

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[…] the Capital One acquisition will mean for ING Direct. As you know, when I recommended my favorite savings account, checking account, and credit card, I named ING Direct as the savings account that I love and […]

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[…] the Capital One acquisition will mean for ING Direct. As you know, when I recommended my favorite savings account, checking account, and credit card, I named ING Direct as the savings account that I love and […]

Max
Max
5 years 3 months ago

Damn!
Only the US branch if ING direct offers sub savings accounts 🙁
I live in Italy. I checked ING direct Italy and every other italian online bank, looking for sub account services or banks that offer connection to Mint, or at least that can be connected to Quicken or similar.
The few customer services that answered to my emails told that, yes, it is a good suggestion, but they are not planning to implement these services soon.
No way to have that degree of automation (and freedom) I’m dreaming of since I read your book.
Sometimes I hate my own country!

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5 years 2 months ago

[…] Thursday: The best savings account […]

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5 years 2 months ago

[…] Thursday: The best savings account […]

Alex
Alex
5 years 2 months ago

Haven’t found any sub-savings accounts in Germany either… 🙁

Akin
Akin
1 year 2 months ago

I’m surprised no mention of American Express nor Discover savings accounts. Both provide great saving rates and have a reliable business. Interest rates are slightly higher for Discover, but they process requests sloooowly. If you have patience for delayed gratification and want to penny pinch, then use Discover savings. American Express moves a lot faster and is better for people running a small business or tech startup. I also recommend them if you have zero patience.

Fede
Fede
1 year 1 month ago

Hi Ramit and everybody.

I was doing some research to open a online savings account. I saw MySavingsDirects.com has a good interest rate. Does anybody have a savings account with them? Any info will be appreciated.
Thanks!

Nelson
Nelson
11 months 26 days ago

What about Europe ?

Taylor
Taylor
8 months 13 days ago

The one downside to the Capital One 360 is that you’re limited to a certain number of transfers per month. But this would be true for any savings account. I had to back off my automatic transfers to once per month to avoid hitting the limit.

Jimmy
8 months 13 days ago

I moved checking and savings Ally. I setup 9 savings accounts, automate money from checking with no fees, get re-imbursed $10/month for ATM fees (though most ATMs are free) and I can manage everything in one place.

Wije
Wije
8 months 13 days ago

This (Ally savings/checking) is exactly what I do. I had a savings account with Ing/CapitalOne. Ally’s interest rates are much higher and they are much more flexible. I had much better experience with customer service with Ally that CapitalOne. Ing was good, but not after CapitalOne takeover.

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Kathryn
Kathryn
7 months 6 days ago

Ramit, I’m a long-time reader and I have accounts at both ING/CapitalOne and Ally, and I highly recommend Ally. Their rates are always better and their customer service is great, plus they have a lot of great perks like no ATM fees (and reimbursement of other banks’ ATM fees). If you are going to make a recommendation as to “Best Savings Account” at least try Ally; in my experience it is superior.

JD
JD
7 months 2 days ago

Hard to find something stable to invest in. The best I’ve tried is growinvestmentcompany.com , I get returns of 10%. Also, acorns.com is another one of my favs.

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CHRIS
6 months 15 days ago

LOVE THIS ARTICLE….What do you recommend if I purchase everything I can with my amex (free vacations!) and pay it off every month through auto pay….I want to stop doing spread sheets, it’s annoying. It did get me out of over 50k in debt though…Now that I have pension, 401k, 457, stocks, savings, emergency fund and checking I want to really see is guilt free purchases. Because of previous debt 10 years ago i’ve become to rigid. Any ideas?

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Sivan Berko
Sivan Berko
6 months 3 days ago

Is there any option for non US citizens?
You must be a US citizen or permanent resident with a valid Social Security number to sign up on Capital One to open an account.

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5 months 26 days ago

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Sonya
Sonya
1 month 21 days ago

Ramit, what are your thoughts on Ally bank’s savings account?

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Hzhsbdsye
1 month 5 days ago

But it’s not available where I live, I live in Dubai btw.

Amy
Amy
21 days 7 hours ago

Hey Ramit–

I’m curious to know what you think about Simple Bank for either checking or savings.
https://www.simple.com/

Currently, I use Chase for my checking account (legacy decision I made a long time ago) and Capital One 360 for my savings account (on your suggestion).

I’ve heard good things about Simple and am considering a move- would be interested in your thoughts.

Thanks!
Amy

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Agnes
2 days 47 minutes ago

Discussion is very informative and good. Thanks for sharing!

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