If you have zero cash in hand, what will you do when your car breaks down, your rent goes up or even when retirement rolls around?
That’s why we save.
Saving part of every paycheck isn’t just good advice, it’s the foundation for financial survival.
But consider this: The more you can safely earn on your savings, the less you’ll need to save and the more you’ll have to spend. So it pays — literally — not to screw up when it comes to socking away those savings and earning as much as possible.
Here are several common mistakes nearly every saver makes. See if you’re guilty of making one or more.
Mistake No. 1: Underestimating the power of higher interest
What’s the difference between a half-percent and 4% interest?
If you’re like a lot of savers, you’ll say, “Who cares? Neither one amounts to much.” But that’s a mistake, and the longer you make it, the more it will cost you.
Example: Put aside $500 a month for 30 years at 0.5% interest, and you’ll end up with $195,000. Nice!
But if you can raise that rate to 4%, you’ll end up with more like $350,000. Nicer!
Doesn’t it make sense to earn an extra $155,000 with no additional effort and with no additional risk? That’s exactly why it pays to shop your savings and find the highest-paying FDIC-insured savings account.
Especially when it’s so simple. There are tons of free online comparison sites, like Fiona, that can help you find top rates on insured savings in seconds. So take a few seconds and check it out.
Mistake No. 2: Overestimating the hassle of opening a new account
Sticking with your current bank is so much easier. No comparing rates, no shopping around and no hassle trying to close your existing account and set up a new one.
But there are two things you’re forgetting.
First, you don’t have to close your existing account to set up a new one. In fact, you shouldn’t. You should try out your new bank first and make sure you’re happy.
Next, moving money is easier than you think. Times have changed. In the old days, opening an account required time, effort, stress and paperwork. These days, finding and opening a better savings account can be done online in less than five minutes.
Just open the online account, connect it to your current bank, click a button and transfer your savings.
You can do it during a commercial break while you’re watching TV.
If you can do something in a few minutes that could make you thousands of dollars richer over time, why wouldn’t you? Then, occasionally check comparison sites, like Fiona, or SaveBetter, and make sure you’re still getting the best deal.
Mistake No. 3: Letting a bank take advantage of you
Here’s what’s happening now: Your bank is paying you next to nothing on your savings. Nationwide, the average rate is just 0.25% interest. Yes, that’s one-quarter of a cent of interest for every hard-earned dollar you save.
Meanwhile, your bank is using the money in your savings account to earn 10 or 20 times more on it than they’re paying you. In other words, they’re getting your money nearly free, and rather than making you richer, they’re enriching themselves instead.
Money for nothing: Nice work if you can get it.
Whom would you rather make richer — you or your bank?
Send your bank a message. Vote with your feet. Find better rates and take advantage of them.
See How Much You Could Save Today
Mistake No. 4: Sticking with a bank out of misplaced loyalty
You’ve been with this bank for years – maybe since you got your first job. Could be your parents still bank there, too.
And that’s OK. Unless you’re cheating yourself.
Banks know that most people are happy to accept the barest crumbs that fall from their table. Don’t be like most people. Take a few minutes and find a better deal.
Loyalty is fine when it comes to your old high school. But if your bank is paying you squat, why should you be loyal to it?
Mistake No. 5: Believing finding the best rate is rocket science
If you’re of a certain age, you can remember when finding a higher savings rate meant calling around, or checking the local paper. After making your decision, you’d schlep to the bank, sign a slew of papers and maybe score a free toaster.
That’s ancient history. These days? Click a link and poof. You’re on your way to growing your savings at 10 times what you’re earning now. Maybe more.
Check out a site like SaveBetter, and you’ll see that some FDIC insured accounts, like Western Alliance Bank, are paying more than 5%. That’s 20 times the national average, and it took less than 30 seconds to find it.
Take a second right now and check out these free comparison sites, you’re going to be happier, and richer, for it!
Bonus: Join 1 million-plus Americans banking $1,000 extra every year
What if we told you there’s a way to earn an extra $1,000 every year without having to work for it?
It’s called the Money Talks Newsletter, and it’s free. Our more than 1 million subscribers report saving an average of $991.20 annually, thanks to our news and advice, including lots of articles and information to spend less, save more and invest like a pro.
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