Most of us would agree that saving money is a good thing in the world of personal finance. Whether for a rainy-day fund, a vacation, or retirement, we’re encouraged to tuck away our hard-earned dollars for the future. But many do not realize that where we choose to stash our cash can make a world of difference in how fast our savings grow. There’s currently a significant opportunity to benefit from higher interest rates.
Unfortunately, a substantial portion of the population isn’t taking full advantage of higher-yield savings accounts, and there are several reasons why. In this blog post, we’ll explore the reasons behind this reluctance and why you should consider switching to higher-yield savings account.
The State of Savings in America in 2023
While savings account interest rates have remained relatively stagnant over an 8-year period, that changed in March of 2022 when the Fed began raising rates in response to inflation. Since then, the Fed has increased interest rates 11 times. While the Fed rate increase impacted loan rates, it also impacted savings rates. High-interest savings options have been available, yet many Americans have yet to transition their deposit balances to high-yield alternatives.
A March 2023 Bankrate survey found that among Americans with short-term savings, just 7% of savers earn an APY of 4% or more in a savings account, and only an additional 14% are earning an APY between 3% and 3.99%. This suggests that many individuals are missing out on the opportunity to make their money work harder for them in an environment of higher deposit interest rates.
Why Aren’t Americans Embracing Higher-Yield Savings Accounts in 2023?
Several factors continue to contribute to the reluctance of many Americans to embrace higher-yield savings accounts, even amidst the backdrop of more favorable interest rates:
- Lack of Awareness: Despite the rise in interest rates on savings accounts, a significant portion of the population remains unaware of higher-yield savings options. This lack of awareness may lead people to assume that all savings accounts offer similar interest rates. However, that is not the case. For example, Benchmark Federal Credit Union offers a High Yield Checking Account Package featuring a 5.00% APY* on savings and checking balances. Yet, very few people are taking advantage of this great rate.
- Fear of Change: Human beings naturally resist change, especially regarding financial matters. The fear of the unknown or concerns about potential complications associated with transitioning to a high-yield savings account can deter individuals from switching.
- Misconceptions: Misconceptions about high-yield savings accounts persist, with some people mistakenly believing they come with greater risks or complexity than traditional savings accounts. In reality, high-yield savings accounts are typically as safe and straightforward as their low-yield counterparts. There’s no catch; you will benefit from a much higher rate.
- Habit: Many individuals stick with their familiar, long-held savings accounts out of sheer habit. Even with the opportunity for better returns, the inertia of maintaining the status quo can be a significant barrier to change.
High Deposit Interest Rates: A Compelling Opportunity
In 2023, high deposit interest rates present an exceptional opportunity for savers to enhance their financial well-being. While it’s true that other interest rates, such as those on credit cards and loans, have also increased, interest rates on savings accounts have risen substantially, allowing individuals to earn more on their savings without taking on additional risk.
Making the Transition to High-Yield Savings in 2023
To seize the opportunity presented by high deposit interest rates in 2023 and unlock your financial potential, consider these steps:
- Research Your Options: Research credit unions and financial institutions offering high-yield savings accounts. Look for accounts with competitive interest rates and no monthly fees, such as Benchmark’s High Yield Checking Account Package.
- Compare Rates: Don’t settle for the first high-yield savings account you encounter. Compare rates from different financial providers to ensure you get the best deal.
- Transfer Funds: To maximize your earnings, consider transferring funds from your existing savings account to your new high-yield account.
- Set Up Automatic Deposits: Cultivate a savings habit by establishing automatic deposits into your high-yield savings account. Consistent contributions will help you reach your financial goals more effectively.
- Monitor Your Account: Utilize mobile apps and online tools to track your account balance and interest earnings. Staying informed about your financial progress is essential.
Don’t Leave Money on the Table
|Traditional Savings Account||High-Yield Savings Account|
|$10,000 in a savings account||$10,000 in a savings account|
|$100 contributed each month||$100 contributed each month|
|5 years||5 years|
|0.45% APY**||5.00% APY*|
|Total Interest earned $281.28||Total Interest earned $3,393.57|
|Total contributions $6000||Total contributions $6000|
|Total in savings $16,281.28||Total in Savings $19,393.57|
Transfer to a Higher-Yield Account Today
In a climate of rising deposit interest rates, it’s crucial to capitalize on the opportunity to grow your wealth more rapidly. Don’t let misconceptions, fear of change, or habits hinder your financial progress. Research your options, compare rates, and make the switch to a high-yield savings account in 2023. By doing so, you can unlock your financial potential and watch your savings flourish, securing a brighter financial future with higher returns on your hard-earned money. It’s time to make your money work smarter for you.
Read more in our blog “The Ultimate Guide to Choosing a High-Yield Savings Account.”
*APY = Annual Percentage Yield. This is a variable rate account, so the yield is subject to change at the credit union’s discretion without prior notice. Account package consists of Saver and High Yield Checking account with matching tiered interest on balances in both accounts; if monthly qualifications are met. Account balances up to $25,000 will earn a yield of 5.00% APY with balances greater than $25,000 earning a yield ranging between 5.00% APY & 3.40% APY. If monthly qualifications are not met then account balances will earn a yield of 0.05% APY. Only allowed one Rewards Checking per member SSN.
**According to the FDIC, the national average interest rate on savings accounts stands at 0.45% APY (as of September 18, 2023).