When we ask most H.E.N.R.Y.s™ how they chose their brick + mortar savings account, we usually hear:
– It was the bank on my college campus (or block),
– They told me to open it when I opened my checking account, or
– My parents opened it up for me and they send me money from time to time.
Okay you got us on that last one. If your parents use a joint savings account to throw a few dollars your way from time to time, keep it open – you’ll hear no qualms from us. But otherwise, it was likely a decision you made once a long time ago and you should close it! Now!
– What if i need access to the money?
– Is an online bank as safe?
– I’m lazy and I don’t want to?
Again, you got us on that last one.
From time to time we come across individuals sitting on some serious cash (like $100k+) in a brick + mortar savings account. Once, we had a client who received a commission check in the amount of $100,000. She was so nervous about what to do with it that she left it sitting in her checking account, which happened to be at Chase bank. By the time we got to her, the money had been sitting there for over a year. So guess what we did with her…some math.
Over the year, she had made roughly $10 in interest (Chase’s interest rate was roughly .01% at the time). If she had kept that money at an online bank, we used CapitalOne360’s for the example, she would have made roughly $750 (CO360’s rate was .75% at the time)…$740 more money just based on which savings account she chose! As you can imagine, she was horrified and a little upset.
The moral of the story is, brick + mortar savings accounts are pretty much worthless! There, we said it. We don’t really care if you want to keep your checking account at a brick + mortar bank, but here are 3 reason you should keep your savings at an Online Bank (our favorites are Ally and CapitalOne360).
1. MAKE YOUR MONEY WORK HARDER
The interest rate for most of the online savings accounts is almost 100x higher than a traditional bank #enoughsaid. You aren’t going to buy a house off this money, but it’s the difference in a few happy hours or a great dinner out. You work really hard for your money, why not make your money work harder for you?!
2. OUT OF SIGHT OUT OF MIND
We hear countless stories of clients who save consistently every month into a savings account. When we ask how much they have saved up the answer is zero! The reason is their checking and savings account are at the same bank. They put a little into savings but wind up moving it back into checking every month to pay bills. Keeping your savings account at a different bank makes a HUGE difference in not being as tempted to touch those funds.
3. DIVIDE AND CONQUER
Our absolute favorite feature of online banks is being able easily open and nickname your savings accounts in accordance with your goals. Studies show that when you nickname your savings account, you are MUCH more likely to stay on track for your savings goals. Don’t save for the sake of saving – save with purpose! Saving up for a new couch? Nickname your savings account “NEW COUCH” or go even farther and nickname it “West Elm Paidge Reversible Sectional in Midnight”. It’s so much harder to pull from your “Turks & Caicos Account” than if the account is just called “Savings”. So whether it’s travel, holiday gifts or your upcoming wedding, set a goal and automate a monthly transfer each per paycheck or per month. You’ll be surprised how quickly it adds up. And with that extra interest you’re earning, go ahead and order another round!