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Keeping my emergency fund in a typical savings account cost me over $600 last year, but I’ve found a way to solve that problem in 2020
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.I built up a $35,000 emergency fund, but by keeping it in a typical bank savings account in 2019,…
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.
- I built up a $35,000 emergency fund, but by keeping it in a typical bank savings account in 2019, I lost out on over $600 in interest — that’s essentially free money.
- I don’t have a good reason for not making the switch — I was just too busy. But in 2020, I’m making a change.
- I’m deciding between two high-yield savings accounts for 2020: CIT Bank’s Savings Builder and a high-interest account from Marcus by Goldman Sachs.
- Find out who has the best high-yield savings account rate right now »
Everyone makes mistakes, especially when it comes to money. Unfortunately, it was easy to spot my biggest money mistake of 2019. In fact, it cost me hundreds of dollars over the course of the year.
The money mistake
My glaringly obvious money mistake was not transferring my robust emergency savings into a high-yield savings account. Instead, I let those funds sit in a savings account at a well-known bank that offers 0.01% APY — mere pennies. Over the course of the year, I lost out on hundreds of dollars in interest payments.
Throughout the entire year, I had an emergency fund of $35,000. Although many experts recommend keeping three to six months’ worth of expenses on hand, my personal preference is to keep a full year of expenses available at all times.
I know that amount of money may seem excessive for emergency savings, but it provides peace of mind for my family and me. As a freelancer, it is extremely comforting to know that we won’t be on the streets if I have a bad string of months.
If I had placed my emergency savings into a high-interest savings account that offered 1.70% APY (a reasonable APY to expect last year before the coronavirus hit) I would have earned $612.50 in interest in 2019. Since I didn’t make that switch, I missed out on hundreds of dollars.
How I let this happen
I wish that I had a great reason for missing out on hundreds of dollars in essentially free money, but I don’t. In fact, sheer busyness got in the way of taking the time to transfer my emergency funds to a high-yield savings account.
Between planning a wedding, taking an amazing honeymoon with credit card points, and setting up a new home, I didn’t make time to take advantage of building my savings with interest.
What I’m doing to fix my mistake
My plan to fix this mistake is simple: I will transfer my emergency savings into a high-yield savings account. Currently, I’m considering two different accounts.
The first is offered at CIT Bank, where I can earn the maximum APY by maintaining a balance of at least $25,000 or contributing $100 each month. With either option, I won’t have to worry about monthly maintenance fees.
The second is at Marcus by Goldman Sachs. With their high-yield savings account, I can earn the maximum APY without any monthly fees or balance requirements. Although there is no quick access to the funds through an ATM, I would be able to transfer the funds to another bank account for withdrawal if I needed cash.
Personally, I am leaning toward the Savings Builder account at CIT Bank. Since I will be depositing over $25,000, I’ll earn the highest-tier APY without needing to contribute $100 each month.
How you can avoid my mistake
My mistake cost me hundreds of dollars — it is possible that you are missing out on hundreds of dollars in interest earnings, too. Take a closer look at the account where you store your emergency savings. If the account is attached to a low APY, consider looking for a high-interest savings account to help your money grow faster.
If you don’t have a large emergency stash yet, consider starting your savings efforts in a high-yield savings account. The Savings Builder at CIT Bank and the high-yield savings account offered at Marcus by Goldman Sachs are both worthwhile accounts. With any high-yield savings account, you’ll be able to start growing your funds more quickly.
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