women on online banking

I was pleased to see in a recent Vanguard survey that more than 70% of women say they feel confident about saving money. I’d be thrilled if it was 100%, but the fact that most women feel confident is great progress. But then came the less-great news: Nearly half of those same women are holding their savings in accounts earning less than 3%.

Right now, 3% should be the absolute minimum you earn, given what is going on with interest rates. There are plenty of high-yield savings accounts that pay at least that much. (My Ultimate Opportunity Savings Account at Alliant Credit Union yields 3%, and you get a $100 bonus after making monthly deposits of at least $100 for one year.)

But I get what happens: life got busy, and you have your savings at the same bank that handles your checking. Convenient. But a lot of the big traditional banks pay less than 1% interest on savings accounts. That’s a steep price to pay for convenience. And it’s not hard these days to open an account at a federally insured online bank or credit union that will pay you much more.

This Is an Opportunity Cost Problem

Let me put some numbers to it. Say you have $50,000 sitting in a savings account earning 1%. That earns you $500 a year. Move it to a high-yield account earning 3%, and you earn $1,500 — a difference of $1,000 a year, for doing essentially nothing other than making one decision.

Compounded over five or ten years, that gap becomes genuinely meaningful. That is money that can help build up your emergency cushion, add to your Roth IRA contribution, or, if you’re in great financial shape, help cover the cost of a much-deserved vacation. It’s the money you never earned because you didn’t make a one-time effort to get your savings to work harder for you.

What to Do

Start by finding out what your savings account is actually earning. Log in and look. If it is under 3%, it is time to compare your options. High-yield savings accounts, money market accounts, and cash management accounts are all worth exploring.

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