I remember the day I opened my first savings account. I was so proud to get my little business card with my very own account number. Little did I know that my parents were saving me from one of the biggest banking mistakes ever………
Why not to have your savings account at your bank
I am going to outline the 4 reasons why your savings account should NEVER live at your bank. Seriously, this is important.
1. Banks suck!
Okay, I’m not telling you to never put your money in a financial institution and that the best way to save money is buried in your backyard. I’m saying that overall, banks suck. They take your money to make more money and give you extremely little in return for the use of your money.
Not all financial institutes are banks. I personally only ‘bank’ at a credit union. I’ll expand more on this later but as a quick point of reference……
for-profit money machines that are more concerned about making investors happy than helping the customer
non-profit organizations that focus on membership benefits (yup, that’s YOU!)
2. Banks charge you fees on your savings account
One of the main reasons that people choose to have a savings account at a credit union is that you simply make more money. This happens in two ways: credit unions typically don’t CHARGE you to keep your money there, and interest rates are usually HIGHER.
The fees that banks charge just for you to store your money is outrageous! If your balance is small (like $500) and you have a $5/month fee you are LOSING money every month you keep your money in that bank. Since interest rates are variable it depends on what your bank offers to see if you make any of that money back in interest. But let’s be real here, you don’t want the interest to be paying you back your own money! You want your interest to be adding to your money.
Time for a little algebra.
$500 multiplied by x = $5.00
That is the amount you would need in interest just to break even! As I write this, a large national bank is offering .01% interest on savings accounts. They also charge $5 a month to have the account. If we had $500 like above, we would pay $5 and earn $.05 cents in interest. We would LOSE $4.95 every month. Be serious!
You will never get ahead paying bank fees on your accounts. Ever.
3. Credit unions have better interest rates
Not only do you save money by eliminating monthly fees but you earn better interest. That’s some easy math!
My credit union is currently offering .05%. If you compare them to the national bank chain above (clocking in a measly .01%) it’s not hard to figure out which is better. The credit union will earn you money 5 times faster!
4. Your savings account should not be too accessible
Okay, be honest. Do you have your savings account tied to your checking account so if you accidentally spend too much it takes money out of your savings? Did you think you were being smart so you would avoid fees? Me too. I did that. No shame folks. It’s a valid thing.
But then I realized that I just made it WAY to easy for myself to spend more money than I should. There is nothing more mortifying than trying to pay for something and having your card declined. Use the fear people!
As soon as my budget was set and my basic needs were met (food, shelter, water) I turned that bugger off. And now guess what? There is more money in there than before! You need to make it just a bit hard to get to that money. No too hard, just enough that you’ll have to think twice before you spend it.
Savings accounts that work for you
If you are losing money in your savings account because of bank fees, please close it. It’s better not to have a savings account at all than to have one that is costing you more money that it’s making for you.
Check out your local credit union or even explore options online! Make that savings account work for you!