Increasing my Savings via Itty Bitty Tiny Little Baby Steps - Part 1
So I was talking to one of the interns today (one of my favorite things to do, BTW, and what may keep me working full-time longer than necessary) and I mentioned my interest in finance and that I might do some blogging. She took the opportunity to chat me up about financial stuff, which was very wise of her. Ah, grasshopper….
Anywho, she mentioned that she and her husband kept a bunch of money in a savings account. I pounced on this opportunity to share Mr. Money Mustache’s concept of all your dollas being little green soldiers, who, while sitting around in a savings account, were basically on an all-expenses-paid-by-you Caribbean vacation. I explained that in most savings-account scenarios you were actually losing money since your piddly .0-whatever % interest wasn’t even keeping up with 2% inflation. I also happened to mention that I had some saved up money in a money market account, and that this at least should keep you from losing money while your soldiers are on R&R leave. She indicated she would run right home and tell her husband he was costing them money by insisting on having so much in their savings account! All is well in the world, right?
Well, kind of. I recently decided to institute many, many little baby-steps to start shifting my finances over to maximum awesomeness. Realistically, I could probably put in for a week of leave, try to do it all, get overwhelmed, and then end up spending my week sitting in front of the TV, drinking pink wine and eating dark chocolate M&Ms, and that would be…not productive. So yeah, one little tiny thing per day or week or however often I manage it. I do have a day-job, people.
This discussion prompted me to see exactly how much interest I was making in my savings account vs. my money market account. I happen to have what I generally believe to be a super-fantastic credit union. They pay me money each year for being a member. Yes, that’s not a typo. They pay me every year. Specifically, they give me dividends based upon how much banking I do with them. I’ve had the account for years (I even get comments when I go in and interact with the tellers because my account number is so low), and I’ve held on to it through multiple states and countries because I like them so much. So, how do their interest rates stack up?
Savings: They have a special savings account where for whatever reason they pay you 3% on the first $500 of your balance, then only .08% after that. I had been putting more money in that account as an emergency fund for the past few months, so my interest rate was actually going down because of that, most recently it was .44%. No bueno.
Money Market: As is common in these accounts, they pay based on your balance. I had recently shored up this account and had over the $2500 necessary in it to get a higher interest rate. What was that super-fantastic interest rate? .65% for the win!!! Huh? You’re not impressed? Well me either. I seem to remember it being higher in the past, maybe that was before the market crash or something.
In essence though, I saw that despite my truly beyond-reproach advice, I was not so much following it myself. I immediately transferred everything beyond the $500 that I was getting 3% on to the money market account, to at least keep it closer to inflation.
Now, the question from here is what to do going forward. Do I stick with my old love and accept the lower returns? Do I minimize the cash I keep in that account and just put it all to work, counting my credit cards mostly as my emergency fund? What about all the money in my checking account – which I didn’t mention earlier, earns no interest? Would it be worth the hassle to open a high-yield savings somewhere, even though I truly hate having multiple accounts to track and generally fuck with?
Stay tuned for part 2! I’m sure this cliffhanger has you waiting with bated breath for next week! I will analyze these options and let you know what I decided to do!