To help aid in the stabilization of the current economy, the Federal Reserve has severely reduced the interest rate. The federal interest rate (what the reserves charge banks to borrow money from them) is down to a paltry 2% (that is up from a low 1.5% this past January). That directly affects the interest rate you can earn on your savings account, as the bank still needs to maintain a profit margin, even in trying economic times.
The interest rate that banks offer is their choice. Historically online banks have offered their customers a higher interest rate as they have lower overhead since they do not have to pay rent on their local branches. Throughout the entire industry the average savings account interest rate ranges from a high of 3.51% (a introductory offer from Everbank) to 2.20% from online favorite ING.
For the security of knowing your money is safe from bank closures you will earn less money for your money. However, it is worth keeping your cash liquid, especially with the current state of the economy as for most novices, any higher risk investment may feel a bit too intimidating at this time.
The best way to help ensure that your money is in a savings account with the best possible interest rate is to comparative-shop online for all the rates out there. Do not just get lured in by a high interest rate, you have to fully read all the terms needed to qualify for the proposed yield. Many times to earn the highest interest rates available from a savings account; there are minimum deposits, as well as time requirements for the investment.
Savings accounts are a safe and effective way to invest your money for future use. The FDIC insures the balance (up to $250,000) and you are guaranteed a rate of return on your investment. Savings accounts are an extremely low risk investment; therefore the average savings account interest rate is conservative at best.