A lot of us trust savings accounts with our hard-earned savings — after all, it has to be better than sticking that money under a mattress, right?
Many of us specifically use savings accounts to set aside cash for an emergency fund or plan for a long-term financial goal. We set ourselves savings challenges and find less expensive ways to get our pumpkin spice lattes, all in the name of putting more money in that savings account.
But what if those savings accounts were actually costing us money? As The Christian Science Monitor reports, some savings accounts “may actually be making your financial situation worse.”
Here’s what you need to know:
High Interest, No Fees
How much interest are you currently receiving on your savings account?
The Christian Science Monitor suggests you look for an account that offers at least 1% interest. If your current savings account is offering less than 1%, it’s time to think about making a switch.
It’s also time to take a good look at your bank fees. If your bank charges fees for low balances or for depositing/withdrawing money, you might not have the best savings account for your needs. Some banks even charge “monthly maintenance fees.”
Look for no-fee savings accounts to save as much of your money as possible — and if you’ve got an account with fees, try calling your bank and seeing if the fees can be waived. We’ve got a list of tips to help you get around many of the most common bank fees.
Saving vs. Investing
The other big mistake many people make is putting too much money in a savings account. Once you have a healthy emergency fund as well as sub-savings accounts for life goals like “vacation” or “down payment,” it’s time to start thinking about putting money into investment accounts instead of bank savings accounts.
If you don’t yet have an IRA or Roth IRA, for example, it might be a good time to start one. You can even consider a CD ladder if you find an option with great interest rates. Put those saved dollars to work and let them earn even more money.
Think of your savings account as a way to get you to a short-term financial goal, like building up an emergency fund or saving for a new car. Any money you save for a long-term goal, like retirement, should go into something that is likely to bring a greater return — not into a bank savings account.
Want to learn more? Read the full story at The Christian Science Monitor.
Your Turn: Does your savings account cost you money?
Nicole Dieker is a freelance writer focusing on personal finance and personal stories. Her work has appeared in The Billfold, The Toast, Yearbook Office, The Write Life and Boing Boing.