This is a great 5 minute research exercise where students go on a Webquest (research on the Web) to answer the question of the highest rate that they can earn on a consumer savings account if they want to deposit $1,000.  Raise the stakes by offering a small reward.

What will they learn from this short exercise?

• Lots of websites track this sort of information (require them to list the source for their answer)
  • Why do websites often have different answers to this question?  They may only post information on banks that are paying them to advertise their product.
• There is a lot of variation in the interest rates that banks pay to consumers
  • Why might banks offer high rates?  Two words: Customer Acquisition
• Banks offering the highest rates may not have physical branches (online banks) or are credit unions.  Leads to some interesting questions:
  • Are online banks safe?  If FDIC insured, yes.
  • How do you get your money?  Check the fine print, but many offer no fees for ATM withdrawals but they may have fees to wire money into/out of your account.
  • How can banks offer much higher rates than the national average?  Online banks have lower costs because they don’t have branches so they can offer higher rates.
• Interest rates on savings accounts are variable so a bank can offer a high rate to get deposits and then lower it later (Depositaccounts.com shows you the history of a bank’s rates so a consumer can sense if they change their rates often).
• Gain familiarity with savings vocabulary and potential fees.

So, what’s the answer today (and it will change in the future)?  I tend to rely on two sites:  depositaccounts.com and bankrate.com for up to date information:

• At Depositaccounts.com, the highest interest rate on a $1,000 savings account on 10/2/14 is 1.05% offered by Quorum Federal Credit Union and My Savings Direct.  Citizen’s State Bank was higher at 1.06% but had a $10,000 minimum.
• At Bankrate.com, only My Savings Direct is listed offering a 1.05% rate.  Note that you have to get through quite a few promoted savings accounts before getting to My Savings Direct.

Also, this activity is flexible enough that you could also have them research CDs or Money Market Accounts too.  Good luck!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.