Things I wish I knew before. . .

Updated 12/7/23

Just a reminder that this is no time to leave much cash in a checking account if you can help it! At the least, you can start simple. Have you checked what your savings account earns you lately? If it’s anything less than 4%, you should move it. Are you saying no to an extra $200 a year? Just think, for everything $5000 you put in a savings account, you could be getting $200 a year. And you aren’t “locking up” your money as you might with a CD, as some people prefer not to do.

Savings Account

After a time when bank savings accounts were at less than 1% APY, the rates are back up again to 4% or more. Check this page at Nerdwallet.com for the latest, best rates available. If you don’t have enough money to lock it up in an I Bond or Treasuries (both of which have higher rates), then choose a savings account or CD which leaves your money much more accessible.

Capital One is now offering a savings rate of 4.35% APY, while my Bank of America savings account only earns me 0.01% APY. It’s a no-brainer: I moved all the cash that I wouldn’t need this month into the Capital One savings account.

Of course, your savings account doesn’t have to be Capital One, but be sure to pick an account that has no minimum balance and one of the higher rates available. Then it’s risk-free to move your money to another account when the rates change. It’s really an indecisive-procrastinating-commitment-phobe-proof choice. Put in $1,000 and make $40. Put in $10,000 and make $400 in a year by doing almost nothing and with no worries about changing your mind or needing the money sooner.

Money Market Brokerage Accounts

As an alternative to locking up cash in CDs, the money market return at brokerage accounts has been climbing with the Fed’s interest rate hikes – many people don’t realize this. Surprise! Doing nothing with your cash in a brokerage account can earn you over 5%! With CDs, you guarantee yourself a certain rate for a certain period, which is still a good option . However, with your uninvested cash in certain brokerage accounts like Vanguard, you can currently earn a pretty high yield – at Vanguard,the VMFXX fund (where your uninvested cash reserves sit) has a 5.29% yield as of 12/7/23. This rate can fluctuate and you don’t have the term guarantees of a CD, but in return, you also have the flexibility of moving your cash anytime. Again, Nerdwallet.com has a good page to find these rates at reputable brokerages and get started.

A few things to remember:

• Some banks have more requirements for higher yields, like a minimum balance of $1,000 or $25K – something to consider. Also, savings accounts come with a maximum number of withdrawals per month.
• The best rates often come from online banks, so the customer service experience may be inconsistent. I chose Capital One because I have always found them to be reliable and responsive over the phone – and very easy to use online. I don’t have knowledge of the other banks that are currently offering slightly higher rates. Be sure to google user reviews on any of the banks before committing. I’ve found some helpful reviews on Reddit’s personal finance thread.
• The rates are subject to change, so pay attention and move your cash to a higher interest rate account whenever you see one.