Who doesn’t love free money?

A high yield savings account is the closest you’ll get to risk-free, free money.

So why are so many people missing out?

In this video I explain why more people aren’t taking advantage of this (limited time) opportunity. Rates won’t stay this high forever!

I also explain how you can get in on the action.

Transcript:

This is literally free money and I don’t want you to miss out.

For the last year or so, interest rates have been rising dramatically. We mostly hear about it in the news in the context of what a bummer it is for home buyers, but the rising interest rate is freaking fantastic news for savers. Some savers who are in the know have been able to take advantage of the saving rates, but for some reason, most Americans have not capitalized on this opportunity. So in case you have not yet heard of online High-yield savings accounts, or have not moved your money to one, this video is for you

To start with, I want to show you how much you’re missing out on. It’s a lot. At most big banks, the ones with brick and mortar locations, the savings rate on their basic accounts are about .1 or .2%. As an example, let’s say I’ve got $1,000 in a savings account for a year at one of these banks and they’re paying me .2%. I’d earn $2 in an entire year for leaving my money in that account. But let’s say I move it to an account offering 4% (and that’s easy as of the time I’m recording this). In a year, I’d earn $40 in interest, just from letting my money sit in this account.

It’s so easy to make this additional interest income, that I’m shocked more people aren’t doing it. A recent Bankrate Survey found that only 1 in 5 savers are earning a rate of 3% or higher. Why are only 20% of savers taking advantage of the higher interest rates?

There are 3 reasons that I can think of for why this is the case and this is what I’d say to someone who had each of these reasons for not transferring their money to an online high-yield online savings account.

1. They were not aware of these rates or where to find them – I wish I could yell this from the rooftops: Good savings rates are available and you’re ripping yourself off by not taking advantage of them. All you need to do is transfer your savings from your brick and mortar bank to a high yield online savings account. Check out websites like bankrate and nerdwallet or literally Google “online banks with highest interest rates.” Read through each bank’s requirements and fine print to see which one fits you. They’re not that extensive and there’s an account for almost everybody. It’s worth your time to look through your options and it takes minutes to set up these accounts. You apply online, transfer funds from your old account to your new one online, and are up and running in days. If you’re thinking it’s a whole big hassle, it’s not. Easy peasy. Easy to find. Totally worth the time and effort to set one up. With most of these accounts, there’s no catch, it really is that simple to earn a decent savings rate. If you’re wondering how it’s possible that online banks can pay out so much more than regular banks, the answer is that regular banks have the expenses of brick and mortar branch locations while online banks don’t. On top of that, banks are earning more interest on the money they loan out and so they’re giving you a teeny tiny piece of that since it’s your money that they’re loaning out. I think the big banks are just counting on people to be unaware of what’s available at online banks or that they’ll be too lazy to move their money, and sadly, they’re right. Like I said, only 20% of people are taking advantage. The vast majority are either uninformed or uninterested in moving their money to an online high-yield interest rate savings account.
2. Concerned about the safety of their money – I imagine that people think there must be a risk to putting your money into these savings accounts. After all, there’s the old adage that higher risk, higher reward and so I think people confuse that into thinking that if there’s a high reward, it must carry a high risk. But no. As long as your online savings account is with a bank that is FDIC insured, then your money is as safe as if it was at one of the big banks. The banking crisis that has seen several regional banks go under recently doesn’t exactly instill confidence in smaller banks, and it’s understandable that people would question bank security, but an online savings account is no less safe than a savings account at the bank with physical branches. I’ve heard some people say that they feel better knowing that they can walk into the bank and get their money, but if there was a bank run, as there was at Silicon Valley Bank, you couldn’t get your money out just because you walked into the bank and asked for it. I know this is silly but I feel like I need to remind some people that your money is not actually sitting at your bank branch, waiting for you to come pick it up any time you feel like it. Well, I guess if you have a low enough balance, that might not be true. But let’s not be silly. Keep your online savings balance under the FDIC protection limit of $250,000 and keep it moving. Your money is safe. If you want, you can spread it out over several banks, if that makes you feel better, but definitely feel confident that your online savings funds are safe at an FDIC insured bank. Also, your money is not locked up or unavailable to you if you put it in an online savings account. You can lock it up in a Certificate of Deposit and earn a little more interest but a plain online savings account will make your money inaccessible for any period of time. Also, this money is not invested in the stock market or anywhere else, so there’s no risk of loss. Your money is perfectly safe in an online savings account, if you’re below the $250,000 limit.
3. They don’t have enough money to really make a difference – If you’re thinking that you don’t have enough money in savings to make it worth the hassle of earning $40 dollars on your savings as opposed to $2 then I invite you to re-think that. First, $38 is not nothing. And don’t forget about compounding. Many online savings accounts compound daily, so that will help your balance grow faster over time. And if you have money in a higher-yield account, you might be more incentivized to save more money and so your savings will grow faster. You can create a budget where you figure out how to increase your savings while having enough to pay for everything else. Actually this reminds me of a reason that people use to avoid budgeting. They claim that they don’t have enough money to budget, but the uncomfortable truth usually is that they don’t have enough money because they are not budgeting. I know it’s not popular but budgeting works and when done well can also be extremely satisfying and helpful to building up savings. On a completely different but no less important note, showing your money that you are doing your best to take care of and maximize it will improve your relationship with money. Money looks out for those who look after it. So it’s not just those $38 you’ll gain when you have a healthier relationship with money.

So check out your online high-yield savings options right now and in case you’re wondering how to calculate how much you personally need in savings, be sure to watch my video on how much you need for emergency savings. And if you found this helpful please like and subscribe. See you in the next one.