Yes, you read that right. Get rid of the rink-a-dink savings account you currently have. I’m sure you have a well known bank (I won’t name any names) but they are pretty much just shortchanging the poor and lending to the rich. So let’s call this bank, Chase Fargo of America or CFA for short. They are probably offering you a measly 0.03% interest rate and that’s typically only for people who keep an average balance of $25,000+ but most millennials have less and receive a whooping 0.01% interest rate! Hope you caught the sarcasm there.
This low interest rate only equates to a few cents in the year and although cents make dollars. Keeping your money here makes no sense at all.
Here are three reasons to switch to a high interest savings account (AKA high-yield savings account) today:
1. More money
Let’s put this in perspective: Inflation is the rate that prices for goods like groceries rise over time, at the end of 2019 inflation was 2.3%. This means the price of milk is increasing, faster, than the interest in your savings. The idea is to find a financial institution with a higher interest rate that will help reduce some of these losses. Some include Synchrony Bank, Barclays, Capital One, Marcus by Goldman, and Ally who all provide at least 1.20% interest rate. The difference between Chase Fargo of America’s 0.03% versus ~1.20% of a high interest savings doesn’t seem like much but compounded over time it’s a game changer. This is a 40x difference in the interest rate alone and it’s compounded DAILY as opposed to CFA who compounds monthly!
2. Less spending
Another great component of many of these high-interest banks, like Ally, is that many don’t have ATMs or branches scattered everywhere. So this will be a great obstacle for you to withdraw money for happy hour or other non-emergency expenses. We’re also becoming a cashless society, actual dollar bills are soon to be obsolete so for actual emergencies your credit cards are readily available. Transfers take approximately 1-3 business days so no quick sneaking your hand in the cookie jar.
3. More saving
The last component has to deal completely with you and how you manage your money with a well known concept called Pay Yourself First. This is simply the procedure of having a set percentage that you will immediately take out of each paycheck and add to your savings account before you do ANY other spending. Most people spend first and save what’s left, yet most people are not financially stable so they find themselves with nothing left to save after paying for bills and leisure items. If you can manage, start with 20% off the top to your savings account and work your way up when you feel comfortable. To see what you’re working with and how much your savings can grow with these changes