• Personal savings rates fluctuate because of several economic and business factors.bank image by Pefkos from Fotolia.com
  
  Personal savings accounts are one of the foundations for economic growth and financial strength. Banks, credit unions and other financial institutions use money deposited into savings accounts to fund loans, investments and various profitable ventures. Interest and returns earned on loaned money is then distributed to savings accounts as dividends paid to depositors. The interest charges on money going out of the financial institution is less than interest paid to saving account depositors. The difference between these two rates is the financial institution's profit. The economic factors impacting borrowers using the savings account depositor's money will conversely affect how high or low the savings dividend is that is paid to the account.
  
  

Economy

• The general economy can lead to business losses, reductions in growth and lower returns to financial institutions. When the bank, credit union or savings and loan company is losing money or not making as much money as projected, then the dividends paid to savings account depositors is lowered. Financial institutions can only pay out to depositors the money earned from loans and investments. If the loans go into defaults or the investments fail, then the financial institution loses money. When there is less money then there are less dividends distributed to depositors.
  
  

Incentives

• Many financial institutions today have many different sorts of accounts and services available. As such, there are incentives for depositors to take advantage of as many services as possible. When a depositor has only a savings account with the financial institution,then the rate paid as a dividend may be relatively low compared to other depositors. If the depositors opens a banking check account, opens a line of credit, creates a money market or investment portfolio or a combination of any such services, the percentage paid as a dividend on the savings account increases. Maintaining just the savings account, however, could mean a low rate even in a healthy economy.
  
  

Balance

• Savings accounts may have various clauses attached to the account balance. A low balance could mean a low rate of return. As the balance increases, the depositor could see higher savings account rates. This practice is a practical response to the fact the financial institution is using the depositor's money to fund other ventures. When the savings account balance is high, then more money is at risk. No matter how great the borrower's collateral or track record, all money going out is at risk. When savings account depositors have more money at risk, then they receive a greater return.