Tips on saving dollars…

Retail Banks will market convenience and you will pay dearly for one stop shopping. It is wise as consumers to be a customer at more than one bank. The big banks offer free checking and that is really all they are good for. Their savings accounts don’t pay interest worth mentioning. In fact, none of their interest bearing accounts will amount to much as far as interest is concerned.

I have been in the banking industry for many years. The customers with the most money saved actually took the time to shop interest rates. They moved their money around to the banks that offered the most attractive rates. No one at Wells Fargo wants to discuss CD rates with you because they are so terrible. Their savings accounts are the same way. However there are community banks that are paying better interest for savings accounts, money markets and CDs.

Here is a tip on saving money that works every time. Have a savings account in a community bank that is separate from the bank that has your checking account. Also do not get online access to these funds. I think a savings account should be inconvenient to access, that way you won’t touch those funds unless it is absolutely necessary.

If you have been saving and want the money for a future event such as a wedding, put the money into a CD at a community bank. The interest will be more attractive and you will have access to the funds at maturity. If you time it right, you will have the funds available right when you need them. If things change in your life and the funds are not needed you can go ahead and reinvest into another attractive interest bearing CD.

A little bit of effort will pay much better than convenience. $100.00 in a savings account at a large retail bank will cost you $4.00/month because it is less than the required minimum of $300.00. The same amount at a community bank with a $100.00 minimum presently pays about 1.0% compared to 0.15% at the big banks. So doing the math; $100.00 deposit at a large retail bank will cost $48.00/year in below minimum fees then pay you 0.15% interest on your balance which would be about $0.07 for the year. Compare that to earning $1.00 for the year at a community bank.

Let us figure the minimum $300.00 payoff at the large retail banks. You would earn $0.45 for the year, As opposed to the $3.00 annual interest payout for the smaller community bank. I know 1% isn’t a lot of interest. However these banks historically have higher interest rates than your national McBank. The super banks say it is because their deposits reserves are so high. They really don’t need or want your savings accounts unless you keep them below the minimums and they can take your money.

Over the years, I have watched people turn modest amounts of money into substantial sums by shopping interest rates and putting their funds into the banks or credit unions that are paying the best return. Sometimes interest rates are not so good like today, but doing the best you can with what you have is a worthwhile practice. Start today, call your local banks and see what they have to offer. Then move your funds to the best account that is available. Every six months check around. You will be surprised at the offers that are available.

This is a wonderful lesson for children. If you have a savings account for your children or grandchildren then time is on your side. You really can get good deals on savings accounts. The payoff is worth the effort. Good luck.