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Different savings accounts offer different rates. Learn why it may not be worth changing banks to get a higher APY on your saved cash. [[{“value”:”
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There are many great high-yield savings account options out there. But the account offering the best rate can change at any time, because the yields offered by different banks fluctuate regularly.
When I opened my account, I chose the financial institution offering the best rate at the time. But this was years ago, and new competitors have come along and offered more competitive returns.
I haven’t moved my money elsewhere, though, and I won’t be doing so anytime soon. Here are the two primary reasons why I don’t shift around my savings to try to make sure I always have the account offering the best yields.
1. Rates change too often for it to be worthwhile
One big reason why I don’t bother to change my savings account to chase the best rates is because doing so is simply too much of a hassle to be worth it. I wouldn’t be guaranteed to keep the new higher rate for any length of time. That’s because interest rates are variable on high-yield accounts, and they can and do shift due to changes in market conditions.
I don’t want to have to move my financial accounts every couple of months just because a competitor to my bank makes a slightly better offer. It’s much easier to just pick a bank offering a good enough account and then just leave my money alone to grow. I don’t want to constantly be checking rates with competitors and be forced to take swift action to move the funds over to get the best deal every couple of weeks or months.
2. A brokerage account is a better bet to grow my money over time
The cash I keep in savings isn’t in that account with the goal of maximizing returns, so chasing a higher rate doesn’t make sense.
I know that brokerage accounts typically provide the chance to earn much higher rates than even the best high-yield savings account can provide. So I’d rather keep as much of my money as possible invested in an S&P 500 index fund, which is a financial index made up of 500 of the largest U.S. companies. The S&P 500 has consistently produced 10% average annual returns, which is far higher than a savings account offers.
Since I want to invest as much as I can, rather than stick money in savings, I keep only the bare minimum in any high-yield accounts. With the amount I have in the account, it doesn’t make a huge difference to get paid a very slightly higher rate on savings from one bank to another.
Say, for example, I have $5,000 in my savings account and one bank offers a 5.00% rate and the other offers 5.15%. Here’s what my account balance would look like in each account over time.
Making a few extra dollars a year isn’t worth the trouble. It would involve keeping tabs on which bank is offering the best deal all the time and switching my account and moving balances regularly. Instead, I have a good account with a reasonable rate, and I just leave my money where it’s safe.
If you have only the minimum in savings to cover emergencies or pay for short-term goals, you may or may not decide that it’s worth it for you to switch savings accounts to try to chase the best rate possible at all times. Just remember, that great rate may have a short shelf life — so be sure you’re ready and willing to act to switch accounts again if needed.
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