Have you ever stayed in a relationship out of a sense of familiarity, obligation, or convenience? I’m not talking about your love life. I’m talking about the bank that is not doing its part to grow your money.
In high school I opened an account with a certain bank. I picked this bank because of its proximity to my internship senior year. When I left for college, I stayed with the bank because it was down the street from my campus. More than a decade later I am still a customer of the bank. You see, the thing is, the bank has a branch a block away from my office…
I have grown very comfortable with this particular bank’s quirks and features. My preferred status with the bank made it easy to park my emergency fund in one of the bank’s savings accounts.
But, if my goal is to maximize the returns on my savings, this particular bank is no longer the ideal companion.
In March 2020 this particular bank was offering an interest rate of 0.30%. That’s below the national average. Now, it’s not completely the bank’s fault. Interest rates are determined by the Federal Open Market Committee, which makes its adjustments according to the economy. But this bank could raise its own interest rate if it wanted to.
Get into the habit of making your money work for you. Your savings should remain largely untouched, but that does not mean your money cannot benefit from the magic of compound interest.
Look for a high yield savings account or money market account that will give you more than the national average. I found an account that yields 1.75% on a money market. I don’t get a debit card or the ability to write checks. It’s an online bank, so I can’t just walk into one of their local branches, but I am sacrificing these minor conveniences in favor of a greater return on my money. My active accounts remain with my old bank, because it addresses those conveniences, monthly obligations, and because it creates a buffer between my active spending and the funds that should only be touched under special circumstances.
It’s usually better to water your own patch before looking for greener pastures. Sometimes though, the water won’t make the green grow fast enough. If your bank is not giving you what you need, it’s time to take your loyalty somewhere else.
Check out NerdWallet for the most current best high yield accounts.
What criteria did you use to pick your savings account? When was the last time you checked the interest rate on that account? If you know there is something better out there, what is keeping you loyal?
If you enjoyed the article, consider signing up for my newsletter!