Alrighty, it’s time to give this mega informative newsletter a make-over – fashioning it with pizzazz while making it more relatable to ‘yours truly’!
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Daily Digs from Dollar Scholar
Welcome, money geeks! Your personal finance guru, Julia Glum, is here with her latest moolah memo for the modern Joe/Jane.
Living with Truman, the Lazy Sunbather
You know, my work-from-home setup is never lonely. Every time I go for a coffee refill, my roommate’s cat is sprawled across the kitchen floor, blissfully soaking up the sun. All hail Truman, our sun deity of sorts! Winter? No problem. We humans shift his cushy bed around every half hour, just to keep it in the sunny patch. And the grateful feline? Eyes shut, warm and cosy, and completely unbothered (much to my envy!).
And it hit me! Truman’s royal lifestyle is a lot like this newfangled trend of bank hopping. You know, people switching from bank to bank to get the highest annual percentage yield (APY) on their savings?
Well, despite the Federal Reserve not making any big moves of late, it seems the super high APYs of top-ranking high-yield savings accounts are starting to dwindle. No wonder, ‘rate-chasing’, the relentless pursuit of the highest rates, is rearing its head.
Should I Jump on the Rate-Chasing Bandwagon?
Cicely Jones, a certified finance guru from Equitable Advisors, explains that moving your cash once from a regular savings account to a high-yielding one is a smooth move. For instance, the average savings APY is a mere 0.45%, whereas Ally does much better with a 4.2% APY, even post recent decreases.
But it seems this rate-chasing business isn’t always worth the ride.
“Switching to a higher-earning account is a great opening gambit,” Jones advises. “But changing banks for a tiny 0.1% increase every month or so? Nah, excess baggage!”
She warns that regular transfers can be lot like juggling knives—timing them right, not leaving any money behind during transfers, and so on. These hoops you need to jump through can, at best, get tedious, and at worst, leave you short-changed.
As Kyle Mack from Zhang Financial aptly puts it, “Chasing an extra 0.1% or 0.2%? Hardly worth the migraines.” Constantly switching accounts can turn into a paperwork nightmare.
His colleague, Rob McDougall, chimes in that such a gainful chase ultimately depends on the amount you have in your account. Shuffling about $500,000 for a slightly better APY might be worth your effort, given the high returns. But if your account balance hovers around $10,000, I guess there’s hardly any appreciable gain to make it worth your while.
And hey, if you’ve such a huge amount sitting idle in a savings account that minor APY tweaks can garner big bucks, maybe you need more rewarding investment avenues.
Jones recommends parking three to six months’ living expenses in a high-yielding savings account as an emergency stash. Any surplus that’s not earmarked for an imminent big purchase, she suggests, should go into investments instead. Taking an online risk tolerance test can help you figure out a proper mix of stocks and bonds, and voila! an automatic investment plan is in place.
(For greenhorns in the investment world, McDougall suggests starting with diversified options like Vanguard’s Total Stock Market ETF or the iShares Core S&P Total US Stock Market ETF.)
Also, remember, you have to play the long game here, as Sekou Kaalund, the small business banking chief at U.S. Bank, emphasizes. Decisions to change banks need to be based on more than just a momentarily high APY, which may plummet at any point.
What’s more, sticking to your current bank can actually score you brownie points. As Kaalund points out, loyal bank customers often get better service in the long run as compared to those who shift banks for fleeting high APY spells.
The Bottom Line
Leave the chase of insanely high APYs to the hares of the banking world because honestly, the time and effort is seldom worth it. An extra dollar or two on top of your already sizable savings isn’t going to make a huge difference. Besides, if you’ve got the dough to make such minute adjustments worthwhile, perhaps investments might be calling!
Listen to Jones: “Stick to a reputed bank with a competitive APY. Review your rate once a year, and only if it doesn’t hold up, consider a switch.”
So, savvy spenders, that’s all from this lofty Dollar Scholar delivery. Get your brain and wallet in sync, dodge the rate-chasing drama, and bask in the warmth of smart finance, just like Truman!
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More Financial Finesses from Money:
- Best Online Banks
- High-Yield Savings Accounts vs. CDs: Fiat Face-off
- Rate Drops 101: What Your Financial Planner Needs You to Know
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There you go! This rehashed version is now a delightful blend of engaging, personal, and still just as informative, maintaining its original friendly tone and structure.