Financial Feminist - 34. Best Bank Accounts for Savings Goals

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Starting point is 00:00:52 Hello. Hello, financial feminists. Welcome back. So excited, as always, to see your lovely faces, even though I can't see you. But I am going to assume that you're doing something fun. Maybe you're on a summer road trip. Maybe you're taking the kids to camp. Maybe you're on your hot girl walk, your hashtag stock girl summer walk. I'm trying to make stock girl summer a thing, guys. I don't know if it actually is a thing. Maybe we've gone viral and it's blown up and it's now this national phenomenon because I'm recording this in July. Let's hope. Let's manifest that it is. First of all, you all were very invested in Subway Man. If you don't remember Subway Man, no, it is not Subway Sandwich Man. Although I did discover recently that Subway is the most popular fast food chain in terms of restaurant locations.

Starting point is 00:01:36 Did you all know that? Like, it's not McDonald's. It's not Starbucks. Subway. Subway has the most locations. subway has the most locations. Anyway, this is New York subway man who I had a meet cute with, who we exchanged numbers. And you all are like, what is happening? You're destined to be together. And I am sorry to disappoint you and say we are not destined to be together. We went on a date actually that same day. The date was fine. He was nice. It was

Starting point is 00:02:07 not a love connection. So I'm sorry to burst your bubble. Maybe the only reason you were listening to this podcast was to figure out if Subway man and I are getting married. This is like the community episode where I'm like marrying Subway. But I'm disappointed to say that it was not it was not a love connection. But I am assured that money and I are very happy together. So don't you worry about me. I'm going to be just fine. But I wanted to give you an update. Y'all were adding me and in my DMs being like, I need I need more info. So Subway man, if you are listening, I wish you the best. And I hope you have plenty of more meet-cutes on the C-Train. In other news, if you have not heard, if you are not following us at Her First 100K, if for whatever reason you skipped the

Starting point is 00:02:59 episode where we talked about it, my book is available for pre-order. This is, as I've said before, and I'll say again, the hardest thing professionally I've ever done. Writing a book is so difficult. It's like a fucking four-year process. And I'm so proud of this book. It'll take you step by step through everything you need to know about money. This is like your one-stop shop for learning how to spend mindfully, learning how to create a budget that doesn't make you want to die, saving money, paying off debt, investing, earning a good wage at a job you like, and most importantly, how to use money in your general life as a tool to build the world that we want to see. It's called Financial

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Starting point is 00:04:14 notes. Today, we are talking about one of the most popular questions that we get all the time. We talk a lot at Her First 100K about savings accounts, about the importance of, of course, saving money. But a lot of the questions we get are like, okay, I know money and saving money is important, but like, where do I put that money? Where does it go? And if you followed us at all for like two seconds, you've probably heard us say high yield savings account, the words high yield savings account. And maybe you're wondering, what are they? Are they too good to be true? What is the difference between high yield savings account, the words high yield savings account. And maybe you're wondering, what are they? Are they too good to be true? What is the difference between high yield savings

Starting point is 00:04:48 account? Is it investing? We're going to answer all of your questions today. And to start us off, we have a lovely voicemail question about high yield savings accounts from a community member. Hi, Tori. I had a quick question about saving for the smaller things in my life. quick question about saving for the smaller things in my life. I'm invested in the market for my long-term goals, but when it comes to things like vacations or purchasing expensive furniture pieces, things like that, I'm a little confused on where to put that money. I wasn't sure if it belonged in the market alongside some of my longer term goals, or if it belongs somewhere like my high yield savings account. When I put things in the market, it seems kind of untouchable. And so I wasn't sure if that was the proper place for these kind of smaller purchases in comparison

Starting point is 00:05:37 to my larger ones. Thanks. Okay, let's start with the very, very basics. What is an HYSA? What is a high yield savings account? In simple terms, a high yield savings account is simply a normal everyday savings account, but with a higher yield. Higher yield meaning a higher interest rate. When you think about putting money into a savings account, we want it to do something for us because the money's just kind of sitting there, right? And you're like, why would I put the money in a bank versus under my mattress or in my backyard? One, much more secure in a bank. But two, and probably the most compelling reason is that you're going to earn interest on your money. You're going to earn compound interest. What does compound interest

Starting point is 00:06:25 mean? Compound interest is simply when your interest earns interest. So if you put $1,000 in a savings account at, let's say, 1% interest, well, suddenly you're not just earning 1% interest on $1,000. You're now earning 1% on $1,010 and earning 1% interest on that and on that and on that, right? It compounds. So when you think about an everyday savings account, the average national savings account interest rate will literally earn you pennies. It's like 0.03% or 0.05%. Any neighborhood bank or even national bank that's brick and mortar, meaning they have physical locations, is probably offering you somewhere around that. Now again, much better than sticking it under your mattress, right? Not only much more secure, but you're earning something. However, that's pennies, right? Even if you have, let's say, $50,000, $75,000, $100,000

Starting point is 00:07:28 in a bank account with 0.03% interest, that's not even 1%. That is a very small amount of money. It's not even half a percent, right? It's not 0.5, it's 0.05. So if the money's just going to sit in a savings account, which is what we want it to do, it may as well be working harder for us. It may as well be earning us as much money as we can. So when we think about a high yield savings account, it's a regular savings account that's offering us more in interest. Now, as of this recording in summer 2022, we're seeing interest rates anywhere from half a percent to about one and a half or even two percent. So again, the great thing about high yield savings account is it's just like a normal savings account, except it's earning you more in interest. Now you're thinking, this sounds maybe too good to be true. Like,

Starting point is 00:08:25 what is the catch here? There really isn't a catch. Truly, there isn't. It's like the one personal finance thing that isn't too good to be true. However, when you're thinking about high yield savings accounts, they are different from investing accounts. Investing accounts like a Roth IRA, a 401k, a general brokerage account. We talk about all of these in our previous episodes on investing. These are accounts where you're putting money into the stock market. These are for longer term goals like retirement, children's college savings, that kind of thing. A high yield savings account is short-term goals. You should not be putting your retirement money in a high-yield savings account, just like you should not be putting your money for a vacation next year into an investing

Starting point is 00:09:15 account. So yes, high-yield savings accounts can earn you more in interest. However, it still pales in comparison to investing. more in interest. However, it still pales in comparison to investing. A high yield savings count is not a supplement or a investing alternative. It is rather a better alternative for your short-term goals. Now, what are those short-term goals? The most popular one is an emergency fund. We talk about it on episode five, the financial game plan episode, the where do I start episode. Please, if you have not listened to that, go back.

Starting point is 00:09:51 But your number one financial priority is an emergency fund. I'm going to say it again. Your number one priority, the first goal on your list before you pay off debt, even before you start saving for retirement, should be an emergency fund. It should be three to six months of living expenses in that high yield savings account. Your emergency fund's job is to sit there and be liquid. Liquid meaning it's basically cash, right? It's a bank account you can access tomorrow if you need that money. And if its only job is to sit there, which is again what we want, it may as well be working harder for us. It may as well be earning us 15, 18, 20 times more

Starting point is 00:10:33 than a regular savings account. Other short-term goals that are perfect for high-yield savings accounts. Vacation funds, like I said earlier. if you want to go on vacation next year or maybe two years, if you're saving for a wedding, if you're saving for a down payment on a house in the next couple years, literally anything that you want to save for that's like a couple years or under out should be in a high yield savings account. I have clients who have like emergency funds, general emergency funds, and then they have pet emergency funds for like if their dog gets sick. And then they have another emergency fund for their house or for like unexpected sunken costs. And then they also have a high yield savings account for their Croatian vacation next year.

Starting point is 00:11:22 Because that's the other thing. You can have as many high-yield savings accounts as you want. And I actually recommend that. Because if you have all of your money for various different goals under one savings account, that gets very confusing. You're like, I don't remember which money is which money. It also leads to potential guilt when you do go to use that money for something. If you don't have your money properly labeled, not only do you not know what it's there for, but you also end up like if you're in an emergency situation, you go, oh shit, I feel bad about using this money. Versus if this money is specifically labeled emergency fund or fuck off fund or when shit hits the fan fund, you're like, okay, that's what it's there for. I'm going to use it. That's the shit I think a lot of people

Starting point is 00:12:10 don't talk about because we don't realize it until after it's happened. But plenty of my clients have gotten into that situation where they maybe didn't listen to me and put all of their money into one savings account. And then when it's time, when they, you know, have lost their job, unfortunately, or they have a flat tire, then they feel so much guilt about using that money. That's what the money is there for. It is there specifically for that particular goal, especially if you've labeled it as such. It helps psychologically for you to not only divvy up, okay, this money is for this purpose, this money is for this purpose, to kind of delegate it in your mind. It's also for you to assuage that guilt, right? The feeling of like, oh shit, I have to use this money. It's like, yeah, that's what the

Starting point is 00:12:56 money's there for. That's what it's there for. That's what you did. You saved for that particular thing. Now, when it comes to high yield savings accounts, here are a couple of the pitfalls that I see. Not about the accounts themselves, but about the way people use accounts or about how they decide what high yield savings account they're going to go with. Most high yield savings accounts, and really they should be, are FDIC insured. A lot of people think, okay, I'm going to get a high yield savings account. That's the catch is like, is my money safe? lot of people think, okay, I'm going to get a high yield savings account. That's the catch is like, is my money safe? Yes. Your money is safe. Typically up to $250,000. Now I will say if you have more than $250,000 in a high yield savings account, especially for emergencies, I don't know what you're planning for. That's a crazy emergency. But again, maybe

Starting point is 00:13:36 safe in some of that money into investing. Again, a high yield savings account is not an investing replacement. It is rather for your short-term goals. And $250,000, either like your monthly expenses are nuts, which you go if you can afford that, or you are keeping too much money in a high-yield savings account. So up to $250,000, it is safe, it is secured, it is guaranteed. The other thing about high-yield savings accounts is people get obsessed with researching them. They spend so much time and effort being like, what is the absolute best high yield savings account? They're kind of all the same. I'm going to be honest with you. There are certain like benefits to different accounts. There's, you know, certain interest rates. However, the interest rate fluctuation like 0.1% is not going to matter as much as good customer service

Starting point is 00:14:29 right I would rather you spend your time finding a high yield savings account that you like at a company that you like and just ride the interest wave than try to go and constantly switch high yield savings accounts because oh this place has like a slightly better interest rate. Now, again, 0.03 to 1.5% is a pretty big jump. 1.5% to like 1.3%, that's not a lot. You should be spending no more than 10 minutes researching a high yield savings account. I'm about to call y'all out. I want you to hear this. I want you to hear me very clearly. You should not spend more than 10 minutes researching a high yield savings account. And lucky for you, we have our recommendation linked in our show notes. Look at that. You don't even have to spend the 10 minutes researching.

Starting point is 00:15:19 We've already done the research for you. Boom. Perfect. Your trusted financial expert with her trusted recommendation. However, if you're going to do your research, please, no more than 10 minutes, use the hours of time you have been spending researching high yield savings accounts into actually learning how to invest. Ramit Sethi, my friend, fellow financial expert, he talks both in my book and on an upcoming episode about $3 versus $30,000 decisions. And a high yield savings account is so beneficial. I mean, we're doing an entire episode on them.

Starting point is 00:15:53 However, you should not be spending the hours of time researching high yield savings account. Find one you like. Find one that has good customer service, good ratings. Again, maybe it's our recommendation. And use the rest of the time actually doing something that's going to be a big picture $30,000 decision, right? Like researching your market rate in order to go ask for a raise or setting up an automatic transfer from your checking account to your savings account every month or starting to invest. That's where your time financially should be going. Your financial self-care time should go towards those bigger impact decisions. One of the other things

Starting point is 00:16:30 to be mindful of with high yield savings accounts, a lot of them will tempt you with a higher interest rate, but it has a catch. So some of these places will be like, oh, we'll give you 3% or 4% or even 5%. And you're like, holy shit, that's incredible. And then they're like, oh, but it's only up to the first $1,000. Or it's only for the first six months of you holding the account. Now, if you honestly do know, okay, I'm only going to have $1,000 in there. Cool. That's great. However, I think anybody's three-month emergency fund is over $1,000, right? So that's probably not the best bet for you. In addition, you end up playing like weird catch up mind games where you're like, I OK, I remember that this one has this restriction and that stresses me out. Like it's just better to find a savings account that's

Starting point is 00:17:22 going to give you a flat interest rate no matter how much money you put in there or how long you keep the account open. Now, a high-yield savings account is different than a CD. A CD is a certificate of deposit. A certificate of deposit is like an even more souped-up savings account, but in exchange for giving you typically a higher interest rate, they are locking you in. So for example, if you had a two-year CD or a 24-month CD, let's say it's at 2%, 2% interest, what they're doing is they're saying, hey, you can put your money in here and you can get 2%. However, typically you can't access that money for 24 months. So they're incentivizing you with a higher interest rate

Starting point is 00:18:11 in exchange for you locking in your money. Now, if you know you don't need that money for a long time, cool, that might be a great option for you. However, that's not super flexible. And again, your emergency fund needs to be super flexible, should not go in a CD. Typically, if you do have to take the money out of a CD early, you only lose the interest. You don't lose any of your original money. You're just out the interest you would have earned. However, right now, most CDs are not offering you much more benefits than a high yield savings account. Like we're not seeing these like crazy good CD rates for the most part. There are some exceptions. Again, a CD maybe only makes sense for you if you know your goals are further out.

Starting point is 00:19:00 You can also, if you're getting closer to retirement, maybe we'll do a whole episode on this if somebody's interested, but a CD ladder, you can Google that. If you're getting closer to retirement and you're taking some money out of the stock market, you can put it in a CD that might make more sense for you. However, for the average person listening, a CD, definitely not for your high yield savings account. A CD, definitely not for your emergency fund. And it might not just make sense in general because a high yield

Starting point is 00:19:25 savings account is going to offer you more flexibility. A couple extra tips for optimizing your HYSA, your high yield savings account. Please set up automatic transfers. You've heard me say this so many times. If there's one goddamn thing you take away from this podcast, you need to automate everything you can in your financial life. So set up an automatic transfer from your checking account to your high yield savings account. If you can through your payroll platform at work, set up, okay, this percent or this amount of every single paycheck is going to immediately go in my high yield savings account. Not only is it happening without you even having to think about it, but it also is doing the hard thing for you, right? Too many people wait to the end of the

Starting point is 00:20:06 month to start saving. If you put in the automatic transfer, it's happening without you having to think about it. It's happening without you having to do anything. And it's just accumulating over time. It's doing the hard thing first. It's paying yourself first, as opposed to the end of the month when you're like, I don't have any money. I spent all my money. I don't know what to save. We got you covered, right? It's happening without you having to think about it. Another pointer for high yield savings accounts is you can set up a tracking or a goal sheet to keep you motivated. You can literally, like you're in kindergarten, put together a coloring sheet, right? Where you get to like color in a star for every like, let's say $200 you put in your high yield savings account, right? Or you can say, I know I need $2,000 to go to Japan next year. Okay, $2,000 divided by 12.

Starting point is 00:20:54 12 is the months of the year. That's how much time I have to save. This is how much I know I need to save every single month and then you get to color it. Maybe it's like a Japanese flag. That would be fun. But set up some sort of goal tracking sheet. When you make your goals visual, you are 33% more likely to hit them. You're also going to be motivated, right? It's like, oh, I get to color that thing in every time I do it. It's like, it's the dopamine. It gives us a little reward, which is very important for us to see progress and to keep going. I will also say, again, I have like a whole section about this in Financial Feminist, the book. When you're thinking about saving money, progressing towards any goal, whether it's financial or not,

Starting point is 00:21:35 progress over perfection. There's going to be months or even multiple months or even maybe years where you can't save a lot or maybe can't save it all. It's important, though, that you just keep going. If you get off the bandwagon for a little bit, it's okay. It's okay. Offer yourself grace and get back on it. I'm going through that right now with my fitness journey. Before pandemic, I was at a bar class two, three, sometimes four times a week, I could have like a band around my legs and eight pound weights on both of my hips and do five minutes of like hip raises. Like, yeah, it was hard, but I could do it. I can barely get through five pounds now with no band. And I'll admit it's been a little frustrating. I'm like, okay, I'm not where I used to be. This is really frustrating. However, I won't be where I used to be if I don't try.

Starting point is 00:22:32 And if I don't build it up, I went through a really hard two years. Pandemic was shitty, shitty for everybody. I'm getting back in it. I'm not in the shape I once was. That's okay. I'm getting back in it. and I'm offering myself grace and understanding and knowing that, okay, I'm going to show up and it's going to be a little harder than it used to be and we're going to slowly build up to where I was. The same thing can happen with your money. So put together some dopamine triggering activities, right? Make a coloring sheet, use a spreadsheet to keep track if that's your thing. And again, automate everything that you can. Now, if you don't already have a high yield savings account,

Starting point is 00:23:11 you're in need of a new one, you're trying to figure out where your emergency fund should go, we have our recommendation linked in our bio. We've done the research for you. Easy peasy. Again, if you don't have a high yield savings account, especially for your short-term goals, you need one for your emergency fund. Absolutely. That's the one that you absolutely need a high-yield savings account for. And if you don't have a high-yield savings account, you are losing money. You are losing an opportunity to grow your money at a quicker pace. Because with compound interest, it helps you. If your goal is to, let's say, save three months of living expenses, let's say that's $10,000, well, cool. Your interest rate actually helps you do that. It compounds,

Starting point is 00:23:52 right? It's less work for you. So you may as well be earning more money. Link in our show notes for the one we recommend. We also have more resources on our site about high yield savings accounts, about what they can be used for. I think we've done a pretty good job in this episode about summing all of that up. But for whatever reason, if you want to read it instead, show notes, we'll link it. As always, financial feminists, please don't just passively listen to these episodes and be like, ah, cool, I'll get around to it. And then you forget. You can literally sit down and like have this done in no time at all. I would rather you actually use this podcast and use the

Starting point is 00:24:32 valuable information in it to make changes in your life. And if you've fallen off the bandwagon, I got you. You're okay. Give yourself some grace and hop back on. And it's okay. It's okay if you're a little slower. It's okay if it's not as much money. It's okay if you've slipped off. The important thing is you get back on. Open your high-yield savings account. Transfer your money out of your regular savings account that's earning you nothing into a high-yield savings account. And again, high-yield savings accounts, different ones for different goals. Okay, team. As always, we are so thankful for your support of the show. So much more information about money in general, about saving money and paying off debt and investing, not only with this podcast, so hit subscribe if you haven't already, but over on our Instagram,

Starting point is 00:25:17 at Her First 100K. And if you haven't taken the free quiz, our free money personality quiz is also linked in our show notes. It is the perfect place to get started. We give you very specific step-by-step recommendations based on where you're at in your financial life. Again, if you're that person who's frantically Googled like, how to money question mark at two in the morning, this quiz is for you. We take our literally thousands of hours of free resources and we've compiled them so you don't have to frantically Google anymore. Thank you as always, Financial Feminists. I love you and I appreciate you. I hope you're having an incredible summer. Thanks for being here and we'll see you back here next week. Thank you for listening to Financial Feminist, a Her First 100K podcast.

Starting point is 00:26:05 Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, marketing and administration by Karina Patel, Olivia Koning, Charisse Wade, Alina Helzer, Paulina Isaac, Sophia Cohen, Valerie Oresko, Jack Koning, and Ana Alexandra. Research by Arielle Johnson, audio engineering by Austin Fields, promotional graphics by Mary Stratton, photography by Sarah Wolf, and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First 100K team and community for supporting the show. For more information about Financial Feminist, Her First 100K, our guests, and episode show notes, visit financialfeministpodcast.com.

Financial Feminist - 34. Best Bank Accounts for Savings Goals

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