How to find a savings account that will earn you more money

GaudiLab/Shutterstock

• A recent study by Goldman
  Sachs found that 60% of survey participants didn’t know the
  annual percentage yield (APY) on their savings
  accounts.
• Here, author Gina Ciliberto describes how finding a
  savings
  account with a better interest
  rate can be just a quick search away.

In an effort to teach me the
importance of saving money, my mom started a savings account for
me when I was six years old.

As a child, I remember filling
out paper deposit slips, diligently writing each digit of what
seemed like an impossibly long bank account number. When I
visited a physical location, the teller thanked me for being a
loyal Wells Fargo customer for one, then two, decades. My banking
routine had a sentimental aspect to it.

There was only one problem: The
interest rate on my savings account was 0.01%. As I gained
pennies on my money each year, I knew that maintaining the
account wasn’t practical. A quick Google search revealed a slew
of savings accounts that offer over a 2.0% annual percentage
yield (APY), sometimes as high as 2.25%.

Of course, even a relatively high
interest rate of 2% on a savings account won’t beat inflation,
and I realize the importance of investing money for the future
outside of savings accounts. But, if you’re putting money into a
savings account, getting the best possible interest rate is a
place to start.

The importance of APY

It turns out, I’m not alone in my
lack of education around the importance of APY for savings
accounts.

In March 2018,

Marcus by Goldman
Sachs

took to the
streets of New York City to ask 1,053 randomly selected
interviewees about their

banking
practices

. They
learned that nearly 60% of participants didn’t know the APY on
their savings account. Over 50% of participants had opened
accounts without looking at any other options.

As Dustin Cohn, head of brand and
marketing communications at Marcus by Goldman Sachs, told
Business Insider: “The national average APY is 0.35% on savings
accounts, but even that is higher than what average consumers are
getting.”

Gobankingrates.com

lists the national average APY as
even lower, a meager 0.08%. In fact, many people in the Goldman
Sachs study had their money in accounts with a 0.1% APY, or
lower, Cohn noted.

Goldman Sachs calculated how much
a general lack of awareness around savings account APY costs
Americans each year, considering that people can get a 2% or
higher APY, but only earn 0.35% on average. The result: Americans
are missing out on $25 billion per year.

Read more:

12 clever ways to save money every day, according to financial
experts

“Americans are not taking
advantage of the chance to maximize their savings,” Marcos
Rosenberg, head of US deposits at Marcus, told Business Insider.
“By not exploring better savings account options, they are
essentially stuffing money under their mattresses instead of
switching to a bank partner that helps them increase the value of
their hard-earned money.”

Americans’ lack of savings

For Georgia Lee Hussey, a
certified financial planner and founder and CEO of

Modernist Financial

, this lack of awareness is not surprising.
She said that it’s common for people to not consider the impact
of their banking structures on their financial situation. The
real culprit here, she said, is a general lack of maintenance in
one’s financial life.

“It’s best practice to evaluate
where you’re banking and what you’re getting from your accounts
every couple of years,” Hussey said.

Perhaps one reason Americans
don’t seem to research their savings accounts is that many don’t
put much money in savings accounts in the first place.
Goldman’s

March 2018 study

also revealed that 56.13% of
Americans currently have less than $5,000 in a savings account.
This month,

Smart Asset

reported that the average
American under 35 years old has $1,580 in savings. Americans aged
35 to 44 have $5,000.

Hussey is an advocate of having
multiple savings accounts: one emergency fund with
three-to-six-months (freelancers, independent contractors, and
people who own a business should have at least six months) of
cost of living expenses, and others with specific short-term
savings goals like an upcoming vacation, new car, education, or
wedding. Beyond an emergency fund and specific, goal-oriented
savings, money should be invested, Hussey said.

Read more:

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hustles

Finding the right bank

Hussey encourages clients to
fully research where they’re putting their money, and to become
informed on everything from hidden fees to corporate values. She
urges clients to consider credit unions or Benefit Corporation
banks that often offer high APY

and

match customers’ values.

“The question is whether your
bank is going to operate in your best interest,” Hussey said.
“Banks with

Community Development Financial Institutions
Fund (CDFI)

investments put some portion of their
deposits toward helping the folks who are typically not served by
the financial industry. I also encourage clients to research how
many of their bank’s loans go to local businesses. A big bank can
say they do these things, but it’s such a tiny percentage of
their portfolio that it’s not meaningful.”

Regardless of how much money you
have in your savings account, there’s no reason not to maximize
your returns. Savings accounts, checking accounts, CDs, and
investments can all be opened online, many of them through mobile
apps.

As Cohn put it: “You can sit on
your couch and have a better savings account in five
minutes.”

He’s right: finding higher
interest rates doesn’t have to be laborious. After a few minutes
of Google searches, I found an account that was a better fit for
me. Now, I’m a brand-new customer at a different bank, and my
interest rate is, happily, over 2%.

“People work hard for their
money,” Cohn added. “Their money should work hard for
them.”