AmiSight 1/26: Are You Taking Advantage of Rising Interest Rates?
A recent story in the Wall Street Journal claimed that Americans bypassed $42 billion of potential earnings in the third quarter alone last year by standing put on their savings accounts. Dating back to 2019, that number jumps to $219 billion lost, and going back to the start of 2014 — when the FDIC started tracking consumer deposits in money-market and other savings accounts— it's a cool $602 billion, collectively.
The reason is simple. Individually, those numbers aren't as punitive, so folks tend to leave their savings where they are – in most cases, the five largest U.S. banks by deposits. Not surprisingly, none of those banks offer an interest yield that would rank near the top. To find that, savers need to become consumers, and in most cases, the money to be made is deemed not worth the effort.
Is it? If you only have $1,000 in savings, the difference between a 0.4 percent interest and 2.14 percent could be less than $20 annually. Even more, than $10,000 may be needed to move you. Especially since rates at those major banks have been slowly rising anyway.
More products are available to save with than just a traditional savings account. As the article notes, folks are investing in higher-yielding products like Series I savings bonds and Treasury bills more than ever.
That seems to be the way to go if you’re sure those savings will be needed soon.