Stay Alert! Things Change. Like Better Interest Rates[Video]

by Michelle Smalenberger, CFP® / February 27, 2020

Did you know that interest rates have actually been trending higher? Which means the money you have been saving in your savings account can also be earning moreI want to show you what this looks like and if you don’t pay attention to things like this, what can happen.

Let’s just look at the difference of where they were, where they are now, and get some different dollar amounts. 

Basically, we were looking at .1% or .01%. These are really low numbers for a long time. I’m sure at some point you looked at your checking account and said, “I’m not earning anything.”

And then along the way, we saw they started to go up. The Feds started to raise interest rates. 

So now we are actually earning a little bit more for what we have in the bank. And at the current time they are at 2% or 2.75% and that range is about the highest that you can find. However, these are always fluctuating. 

And that’s really the point of today’s topic is to talk through this. 

If you leave this money in your savings account, or your checking account even, you’re probably getting this 0.1% or 0.01%. It is not a lot. So at that rate for $1,000 you are going to earn a dollar per year. 

Not very exciting.

But if I get to change it to the 0.5% a little bit more as rates go up, I get $5 per year. So just a little bit higher rate. At 1% on the same $1,000 I can get $10. And then 2% I can get $20.

Now this is on a scale of $1,000. But let’s look at that emergency fund.

And we’ve talked about getting that emergency fund of 3-6 months income if something happens, you have something that’s readily available. 

Impact of Better Interest Rates

Now, instead of having just $1,000, you’re going to have about $15,000 or $20,000 in that account. So now, if I take this $20 times $15,000, now I’m looking at $3,000 a year instead of just $20 a year. 

What we’re really talking about is the difference of staying low down here in the 0.1%. And the point is that you don’t want to get stuck. 

Instead of just keeping things as they are and not paying attention and moving things around, this is where if you make this change, now we are looking at these dollars in the $20 range. 

When you multiply this by a $1,000, this is actually a meaningful amount. It’s always great to be paying attention to these little trends. These little things are happening all the time and we hear people say, “Maybe I need to make a little change. Maybe I need to move my money from my checking account that I don’t use, that is extra every month into my savings, so that I can earn a little bit more.”

You can see the difference that it is making along the way. 

If you are not sure what to do next or you just want help getting guided to an account that could actually get you some good interest rates, you can reach out. We are happy to help you find something that is a good fit for you. 

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Michelle Smalenberger, CFP®

I have a passion for helping others develop a path to financial success! Through different lenses on your financial picture, I want to help create solutions with you that are thoughtful of today and the future. I have seen in my life the power of having a financial plan while making slight changes of direction from time to time. I believe you can experience freedom from anxiety and even excitement when you know your finances are on track.