Opening an online savings account is seriously so easy and it can boost your financial position so quickly, that I often wonder why it is that people don’t do it.
Then I remember something I’ve known for years now – doing good things with your money is rarely as easy as knowing you should do something with your money.
You can know something is a good idea yet still struggle with taking action on it. And when it comes to money, that’s par for the course.
So in this series, I’m going to explore online savings accounts, but in a detailed and nuanced way.
- If you have heard of online savings accounts but don’t yet have one, I hope this series helps you take confident and empowered action.
- If you already have an online savings account, I hope you’ll share these articles with a friend or family member who may be interested or who could benefit from the deeper exploration in order to really understand them.
Let’s dive in…
People who have a savings account at their local or big bank are probably earning interest of about .01% right now.
That means if you have $1,000 in savings, this year you’ll earn 10 cents (multiply $1,000 by .0001).
Let me show you.
I have a savings account at my main bank (where my checking account is) because as long as I keep $500 in savings there, my checking account is free. (Banks LOVE making us jump through hoops don’t they?)
This big-bank-savings account pays .01% interest. Even if you kept a significant amount in your savings account, it’s still insanely low – .04% interest.
You can tell which banks are proud of the rate they’re paying by how easy or hard it is to find the rate! If it’s plastered on their home screen, they are proud of it because they’re likely competitive. If you have to go down a rabbit hole to find the rate, they’re hoping you don’t notice or lose interest.
- Bank of America – .01%
- Wells Fargo – .15%
- Chase – .01%
- US Bank – .01%
- USAA – .01%
- Comerica – .01%
Essentially, the interest is non-existent. But the same isn’t true of most online savings accounts. As of today, they are paying roughly 4.25% interest.
That is 425 times GREATER!
Take that same $1000 in savings I mentioned earlier, but put it into one of these high-yield online savings accounts….and you would earn $42.50 this year (instead of $0.10).
Now, back to this question of “Why don’t people do this?” – Why do people settle for low interest rates in their savings account?
I think there are a number of reasons – all of which we’ll cover in this series.
- Online savings accounts seem sketch. I get it – there are fake websites and spammers galore online. There’s so much talk about the next “get rich quick” scheme that sometimes even good strategies seem overwhelming and high risk. We’ll talk about this next.
- It doesn’t seem worth it. If you’re struggling to save money or keep money in savings (one of the top 3 problems we see), you may be thinking “Who the hell cares how much interest I could earn, I’ve got to save money in order to make money.” I will definitely address this because what actually happens is counter-intuitive. Knowing you WILL earn money on your savings actually ENCOURAGES you to save money! It boosts the precise habit you feel like you’re struggling with!
- Decision fatigue. I don’t know about you, but it seems life requires so much coordination. Sometimes the smallest decision feels impossible to make, especially if I feel like I need a bit more information or need to do even basic research before making a decision. So I’ll help with this over the coming month too. I’ll take allll of that information “out there” and distill it down to what’s most important for you to know.
- The other benefits are unknown. The better interest rate may be the #1 financial reason for opening an online savings account, but it’s not the only reason. There are other benefits we’ll explore that are just as important to helping you become the most financially fit version of you.
I’ll cover each topic over in this series.
Is there another reason you haven’t yet opened an online savings account that I might have missed?