Grow Your Nest Egg Faster Than Inflation - Don't let that cash under your mattress lose value over time.
No matter what your financial goals are, no matter how much money you have, an increasing bank account is always better than a decreasing one. For years, traditional savings accounts were where we were told to hold our liquid nest egg for safe keeping, until we needed it for a big purchase or an emergency. We were put under the impression that a savings account offered interest to allow your account to grow as time progressed, which was the main difference from a Checking Account. Sadly, these traditional savings accounts have historically failed to keep up with the rate of inflation, thereby decreasing the intrinsic value of your hard-earned nest egg each year. Now, you can invest that money into the stock market, which in some situations I would strongly recommend, see my article on “Investing Apps”, but if this money is your rainy-day savings that needs to remain liquid in case of an emergency or that cool vacuum you’ve been eyeballing goes on sale, the stock market is not the proper home for your money. I recommend moving your money into a high-yield savings account and taking advantage of the benefits they have to offer. By that I mean a savings account with an interest rate that is around, preferably higher than, the average rate of inflation.
Don't Just Settle
Because my father worked for GTE for many years, we were a GTE Federal Credit Union family. All of our saving accounts were with GTE FCU, however, they are not high-yield savings accounts. It’s been a while, but if I remember correctly, they only offered a rate of 0.05%, which didn’t even keep up with inflation. Despite this fact, my parents still use GTE FCU, but after discovering the concept of high-yield accounts, I could no longer stand by and watch my money grow slower than the rate of inflation. I had to get out.
Online Banks with High-Yields
I started looking for accounts that offered the best interest rate for my nest egg, reading many articles from sites like The Motley Fool and The Penny Hoarder, and came across a virtual bank called Aspiration. They are a planet-friendly, sustainability-driven, online bank that provides a checking account with a rewarding debit card, a high-yield savings account, a personal investment option, and a retirement savings option. When I joined back in June 2017, they offered a 2.00% interest rate on your entire balance over $10,000. This was unheard of to me; more than 10x what my previous savings account offered. WHAT!? I couldn’t resist and transferred my savings to this new concept bank and started earning some difference-making interest. Unfortunately, due to the current pandemic situation, with falling interest rates in every area of finance, they dropped their rate to 1.00% and have added some stipulations. Now, you have to upgrade to their Aspiration Plus account to earn 0.25%, and if you spend $1,000 with your debit card each month, then you can unlock 1.00% for that month. This upgrade to Aspiration Plus costs $7.99/month or $5.99/month if you pay annually. Here is where they lost me. I don’t want to have to pay a monthly (or annual) fee, and spend a certain amount of money each month just to earn interest on my savings, when I signed up to get 2.00% without having to lift a finger. This is not what I originally signed up for. So now, just like the GTE FCU account, I’m out.
This is not what I originally signed up for...I'm out.
Now I use Citi’s Accelerate Savings account, that offers an interest rate of 0.5% on the entire balance. When I first opened my account, the interest rate was at 1.50%, but just like all other savings accounts, it too was affected by the pandemic’s impact on all financial institutes and had to drop their interest rate. At first it dropped to 1.25%, then to 1.00%, then to 0.75%, and finally came to rest at 0.50%. But, I’m hopeful that when interest rates start to go back up, Citi will follow suit and my nest egg will start earning more interest. What I like about Citi’s account, is that there is no minimum deposit amount needed to start earning interest. So, essentially, you can start earning interest with just $1.
Stick with What You Know
Doing some quick research online, you can find other banks that offer higher yields than the Citi Accelerate Savings account, like Comenity Direct or CIBC Bank USA, but I was already established with Citi, using my Citi Double Cash credit card for just about everything (which I’ll discuss in another post), and Citi is a well-known name in the banking industry, so I feel very comfortable holding my savings with them.
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