Any interest earned is income, but you would need a substantial amount of savings to rely on the earnings that are generated. That said, there are some ways to increase the interest you earn.
1. Switch to a Credit Union
Credit unions give you the same access to checking and savings accounts, CDs, loans, and credit cards that a bank does. The biggest difference between the two is the interest rates.
A credit union operates as a not-for-profit institution. This enables them to offer higher interest rates on savings accounts and lower interest rates on credit cards.
If you're fed up with banks, credit unions are a better option than stuffing money in a shoe box. They're cooperatives and their members are the owners and decision makers.
Unlike a bank, where it's stockholders and board members who call the shots.
2. Open a High-Interest Savings Account Online
If you already use online banking, this will be a breeze. A high-interest or high-yield savings account earns you more interest on your deposits than a traditional bank.
The average interest rate is .25% annual percentage yield (APY). According to a recent survey of banking institutions, the bigger banks pay less. The same survey found the highest APY on a high-interest savings account is 2.25%.
It may not sound like a big difference but it's huge when you do the math.
Using .25%, if you deposit $1,000 into your current savings account, you'll have $1002.50 in a year. If you deposit $1,000 into a high-interest savings account online, you'll have $1,022.50.
But you make interest on every deposit with a high-interest savings account. That's where the huge gap comes in. Online banks can pay higher interest rates because they have little overhead.
The caveat to online high-interest savings accounts is that they tend to come with a maintenance fee and/or a high monthly minimum balance. Some require as much as $10,000 to open an account.
3. Put Your Savings into a CD
If your savings is for retirement or is something you won't need for a long time, you may consider a CD (certificate of deposit) instead of a savings account. But you'll have to leave your money in it until the maturity date.
The term lengths are usually six, 12, 18, 24, 36, 48 and 60 months, and the APY is higher than a high-yield savings account (up to 3.7%). The downside is that financial institutions will charge you a fee if you withdraw before the maturity date.