So, let’s talk Savings Accounts
As we all know, the fed has been raising interest rates over the past year. This has impacted people by having higher credit card interest rates, higher mortgage rates & higher loan interest rates (think car, personal etc).
There is one place to take advantage- higher savings rate.
Your emergency fund & savings fund accts- what savings rate are you getting?
(Savings fund acct = putting money aside for future expenses- vacation, Christmas (yes, it comes every December 25th), car maintenance etc.)
Some banks are offering less than 1% interest rates while others are 4% - 5%
With life happening around us, it’s easy to not pay attention to what your rate is- this happened to me.
So recently I made some calls and did some internet searching. Here is what I learned from the banks in my area:
· The big credit card/bank companies (ie CapitalOne, Amex etc)- rates 4-5%
· Online bank options- rates 4-5%
· My local credit union- 1% or less
· My bank- who I have been with for over 20 yrs- less than 1%. (unless I want to put $100,000 in savings- then they would give me around 2% for a whole 6 months- thanks but no thanks).
CD’s are an option but they tie your money up for a period of time. Not what I want since I may need to access my emergency fund and those future funds.
When choosing if you want to switch where your savings acct is held- consider a couple of things. The interest rate is just one variable. Make a list, in order of importance, of what you features are important to you.
1. FDIC Insured - ***A Must***
2. No fees - I have never paid a bank fee- (not a fan of fees)
3. No minimum balance
4. Ease of Use
5. Create some friction accessing the account- for example:
Make it a little harder to access the money so you are not tempted to take money out for things that aren’t emergencies. Also, many of these accounts have a 6 withdrawal limit per month which also helps create friction.
6. How does the bank help you to save and manage your money.
One of the online bank has a savings acct where you can create up to 10 buckets (think digital envelopes) to designate your savings.
Example: You have $3,000 in your savings acct
You can assign the money to a bucket track and prepare for the future expense.
Here is a bucket example on $3,000-
a. $1,000 Starter Emergency Fund (should be higher after all debt paid off)
b. $300 Christmas
c. $500 Vacation
d. $800 Tax holding (some clients have a small business)
e. $100 Pet Medical
f. $300 Future Car Maintenance (ie tires, brakes etc)
It’s important to save for expenses that you know are coming.
Now you are prepared to cover those costs before they happen- how would that feel?!
YOUR ACTION STEP
What interest are you getting on your savings?
Is it time to make a change?