Twice a year, I go through a routine ritual. I sit down at my computer and check the interest rates on high-yield savings accounts. Then, if I find a bank offering a better interest rate than my current one, I take the time to move my money over.
There are two big reasons I’ve made this a bi-annual routine part of my money management process.
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Here’s why I shop for a new savings account twice a year
The first and most important reason I shop around for a new savings account twice a year is that I want to maximize my potential return on investment. I have quite a bit of money in savings. For example, I have a hefty emergency fund so I’m prepared for a rainy day. And I also have separate dedicated savings accounts for things like home repairs, a new car, or saving for big purchases.
I maintain a lot of savings accounts with large balances because I don’t like to go into debt and I want to make sure I’m prepared for whatever life sends my way. I may need to tap my emergency savings at any time. And I might need to turn to my other accounts in the next couple of years. As such, I don’t want to risk that money on the stock market. I need a safer investment that I can access when I need to, without worrying about pulling my money out during a bad time. But I still want to maximize the interest I earn.
High-yield savings accounts allow me to earn a better rate than I could if I just kept the money in my bank’s savings account. But new savings products always come onto the market, and interest rates can change periodically on existing accounts. I compare interest rates to make sure the company I save with still deserves my business. If I find a different offer that allows me to earn more interest, I’ll move my money.
Of course, this can be a little bit of a hassle. And that brings me to the reason I do this process twice a year. I’ve found a biannual review to be a good balance between the time spent on the process and my efforts to maximize returns. Checking rates and moving money every month would become more hassle than it was worth. And it would waste enough time that the incremental rate increase wouldn’t be worth it.
Gain up to $50 a year
Doing it twice a year means it only costs me around 20 minutes each year. I’ve consistently been able to increase the amount of interest I earn by around $40 to $50 per year. This amounts to around $150 an hour — which is time well spent.
Of course, the extra amount you can earn by changing savings accounts depends on how much you have invested as well as how much time you’re willing to spend shopping for rates. But you’ll likely find it’s worth taking a look once in a while to see if you could get a better deal. In fact, you may be surprised how making a change once or twice a year could make a big difference in the interest you ultimately earn.
View more information: https://www.fool.com/the-ascent/banks/articles/why-i-shop-for-a-new-savings-account-twice-per-year/