High Interest Rates

• Getting the most for your money is important, whether you are buying a new home appliance or building up the funds you need to pay for it. The more interest you can get on your money the less you will need to save. You can start your search for the highest yielding savings account at a local bank, but do not simply take the first fund you are offered. Search at other local banks and credit unions, as well as online banks. Online banks are often able to provide higher rates of interest due to their lower expense structures. If you are comfortable doing your banking online, you might be able to get a considerably higher rate of interest.
  
  

FDIC Coverage

• Whether the bank you choose exists only in cyberspace or in the brick and mortar world as well, full FDIC insurance coverage is essential. If the institution you choose for your savings account is fully FDIC insured your savings account deposit is covered up to $250,000, but if you do not have that coverage in place you could lose a lot of money. Check the FDIC website (see Resources) to verify the coverage status of the banks you are considering.
  
  

Tax Considerations

• The interest you earn on your savings account is considered taxable income by the IRS, so you will need to factor that income into your tax planning. If you have only a small amount of money in your savings account, the interest you earn should be quite inconsequential in terms of your overall income. But if you have a large balance, that interest could make a difference in the amount you owe the IRS when you do your taxes. If you are in this situation, do advance tax planning and put some extra money aside to pay any taxes due.
  
  

Optimal Cash Level

• Before you open your savings account, decide how much cash you want to build up in that fund. You might have a specific purpose in mind, such as building an emergency fund or saving up for a major purchase. If you are saving for a major purchase like a car or the down payment on a home, you already have a good idea of how much you need to put aside. If you are building an emergency fund, you should shoot or a minimum of three months' worth of living expenses, although you might want to save more, depending on the security of your job, your financial situation and other factors.