This post was originally published on 5/6/20 and updated on 11/17/22.
This is no time to be doing nothing with your cash as inflation reduces your checking account balance by 8-9%. At the least, you can start simple. Have you checked what your savings account earns you lately? If it’s anything less than 3%, you should move it.
First Step to Fighting Inflation
After a time when bank savings accounts were at less than 1% APY, the rates are back up again to 3% or more. If you might not have enough money to lock it up in a CD or an I Bond (both of which have higher rates), then choose a savings account which leaves your money much more accessible.
Capital One is now offering a savings rate of 3% 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 $30. Put in $10,000 and make $300 in a year by doing almost nothing and with no worries about changing your mind or needing the money sooner.
I found Nerd Wallet to have the most straightforward page listing of current rates. Use their calculators to see how much your savings could grow in a year. There are a number of rates slightly better than the 3% being offered by Capital One, so you should sift through and see which one makes the most sense for you. If you’re willing to put you cash away for a year, then consider CDs which are now up to ~4% as of this publishing date. Since most of these are online banks, you don’t need to put your mask on and go out. Just go online and claim your $$.
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 savings rate account whenever you see one.