There are few events in life more boring than shopping for a new savings account. And since we all lead busy lives, it’s easy to let this type of chore fall to the wayside. But if you simply stick with what you have and never look around for a better deal, it’s safe to say you are leaving money on the table — like it or not.
This is especially true with traditional savings accounts you get from popular brick and mortar banks. According to the FDIC, the average savings account currently earns .10 percent, which is an absolute shame.
Leaving your savings to linger in an account that pays hardly any interest can lose you money in the short-term and over the long-term as compound interest is applied. And the longer you let it go on, the worse it gets.
Calculate how much you may be losing
How much are you losing with your old bank account? It really depends on how much you have saved, how long you’ve saved, and how much you might be able to save in the future.
But consider this, if you have $25,000 in savings and don’t add to the balance for 10 years, you would only earn $251.13 in interest with the average savings account (if compounded annually), using this handy calculator.
On the flip side, let’s imagine you open a new Savings Builder account from CIT Bank so you can earn 2.30% APY on your nest egg. Over a 10-year period, you would earn $6,383.14 in interest if you didn’t make any new deposits.
That’s a huge difference!
Your earnings will be smaller if you save less overall, but the disparity will still be significant. Let’s say you have $5,000 saved and pledge to add $100 to your account every month for the next 10 years:
- If your account paid .10%, you would have $17,104.37 after 10 years.
- If you were earning 2.30%, you would have $19,597.96.
No matter how much more you’re earning, keep in mind that this is basically “free money” you get for opening a new account and diverting your funds away from your old one. You won’t even have to close your old savings account if you want to keep it open, so there’s really no excuse.
It’s far too easy to ignore this chore for another month or another year. Just remember though, you’ll lose more money the longer you wait.
What to look for in a new savings account
Maybe you’re tired of earning meager interest on the money you’ve worked so hard to earn. In that case, it’s time to shop for a new bank account — and it may not be as tedious as you think.
There are numerous online banks that make it easy to set up a savings account, contribute money, and monitor your savings online. Here’s what to look for as you shop around:
A high APR
One major factor to consider first is the interest rate each account offers. Many online banks offer more than 2.0% APY if you keep a certain amount of money in the account, although requirements vary. Keep an eye out for savings accounts that offer more than 2.0% APY, so that moving your money over will be worth it. (See also: 5 Best Online Savings Accounts)
Terms you can meet
Also, keep the terms and conditions of each type of account in mind, including any minimum deposit requirements. For example, an account may offer over 2.0% APY if you can meet one of two conditions. You can either a) keep $25,000 on deposit in your account at all times, or b) deposit at least $100 into your account every month.
Make sure you choose an account with a minimum deposit amount you know you can meet, or a regular deposit amount you can keep up with.
No account management fees or hidden fees
Another important factor to consider is fees. Most of the best online banks that offer exceptional interest rates don’t charge any account management fees or hidden fees, but you should always check. The point of finding a new savings account is earning more money — not spending it! (See also: 8 Fees You Need to Stop Paying Right Now)
Easy access and money transfers
Most online banks make it easy to transfer money in and out of your other accounts, monitor your savings progress, and make deposits. Make sure any online bank account you sign up for offers the minimum functionality and features you need to get by. Check to see if the bank has a mobile app, for example, and look for perks like mobile deposits and ATM access in your area. (See also: 8 Ways to Make Sure You Never Pay an ATM Fee)
The bottom line
Don’t let complacency rob you of thousands of dollars over the next few years. Take less than an hour of your time and open a new savings account that will reward you for your savings and help you grow your money over time. Considering most online banks don’t charge any fees, there’s no reason not to.