Why the Interest Rate in Your Savings Account Is Not so Important
Savings rates in banks are notoriously low these days, but some offer a “high interest rate” of one percent. As someone with a high interest savings account, I can tell you this is not such a big deal. That’s why.
Sometimes changing banks is a good idea , especially if you are inflated by fees and terrible customer service. However, this can also be a problem , so you probably don’t want to switch just because the bank has an interest rate of 1%.
First, this interest rate is usually only valid for customers who have a certain amount in their account. Plus, as Refinery29 points out, to start off, you shouldn’t have that much savings in your account:
You can earn interest and still lose money. Here’s why: Inflation averages 3% per year, so even at the best online banks that pay 1% per annum, you still lose 2% every year. To minimize your losses, you want to save no more than your emergency fund and short-term savings …
To put the numbers in perspective, if you keep a daily balance of $ 6,000 in an account that earns 1% per annum, you will get about $ 60 per year. That’s a whopping $ 5 a month. This approach is in line with the principle of saving a penny instead of looking at larger costs . Sure, the little things add up, but it’s a much smarter financial move to place your savings in the best place. To find out more, navigate to their full publication at the link below.
29 Monetary misunderstandings that make you lose $$ | Refinery29