If you're like me, when it comes to interest you are more accustomed to paying it than earning it. Well, I am obviously on the way to changing that. But in the meantime, even while paying off debts, you might still be able to take advantage of earning interest. My husband gets paid a salary plus a commission. For our budget, we need to save funds from the high commission months to cover expenses in the low commission months. So, at any given time we may have several thousand dollars that we need to save. Even for these short periods of time, and even while we are paying down our debts, we can still earn interest.
Now, interest rates are not the highest in recent history, but don't let that stop you. There are a few places where you can still earn almost 5%. That's not bad. Considering you don't have to actually do anything, except deposit the funds, to earn the money. If you are new to this, as I was, I will explain that an account that earns 5% interest generally means that over a period of one year, you're money will earn 5% interest. So, if you deposit $1,000 and leave it there, at the end of the year you will have $1,050. (50 being 5% of 1,000). In reality, it is even a little better than this because the interest is usually compounded monthly, meaning that they credit your account with 1/12th of the 5% every month. So, not to get into the detailed math, but after the first month the bank would credit your account with some of the interest, let's say $4 to make it easy. So at the end of month 1 you would have $1,004. The next month you would earn another 1/12th of 5% of $1,004, instead of $1,000. This is the compounding part of the compound interest. So, at the end of the year, if you don't touch the money, you will actually earn more than 5% of $1,000.
I know a few banks are offering interest rates around 5%. I am currently using EmigrantDirect.com. I deposited $1,000 in February and then another $1,000 in April and then another $4,000 in May. So far I have earned $18.00 in interest. I already needed to take out the $4,000, but earning $18 in a few months for doing nothing is not that bad. I take a lot of on line surveys to make $18. Earning it for just keeping my money in an account is a no brainer.