Check Your Pockets

Do you know that feeling when you find money in your pocket when doing laundry? So how often do you put the bill back in the wash?

Last year, a GOBankingRates survey showed that an alarmingly high number of Americans have less than $1,000 in savings. While the media rightfully highlighted the savings shortfall in its coverage of the survey, as a financial planner, I wondered how the 30% of us that have more than $1,000 in savings are doing.  

As it turns out, while we may be hard pressed to find someone that would admit to passing on picking up a found $20 bill, it may be far easier to find folks leaving a lot more than loose change at their chosen savings institution.

To confirm my hunch, I started by visiting BestCashCow.com, a site that tracks interest rates at a variety of depository institutions across the country. There I learned that the average interest rate on savings accounts on their site is a whopping 0.13%. This is a cross section of institutions that may be local, on the other side of the country, or online only. What the best paying options on their site have in common is that they offer competitive interest rates significantly higher than the national average while still being insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

Today, there are several banks offering annual percentage yields 8 – 9 times the national average. If you have $100,000 in savings being paid 0.13% APY, you’re earning about $130 per year. Opt instead for one paying 1.15% and see your earnings increase to $1,150 with virtually no risks.

These accounts also fare well against some of the largest mutual fund money markets. A couple of the largest examples are the Fidelity® Money Market Fund (SPRXX) with a current 7 day yield of .76% and the Vanguard Prime Money Market Fund (VMMXX) is at .92%. These are certainly better paying options than the average savings account, but would fall short of the federally insured saving accounts noted in the previous example. Using the 1.15% as a comparison, you would earn $390 or $230 more, respectively, on a $100,000 balance over the course of a year if all the rates stayed the same over that period. 

Just to be clear, I’m not advocating investors rush to pull cash out of their long-term investment portfolios to cash in on interest rates hovering around 1%. However, for those emergency accounts or cash that is earmarked for a specific purpose in the next year or two, it makes little sense to allow your bank or fund company to use the money for less than the market will bear.

What financial institutions count on is you staying with them once you have your assets on deposit. Some may encourage you to put money in by offering you more favorable terms on credit or other offerings if you maintain a deposit account above certain thresholds. Others may entice you with a freebie, like an upfront cash bonus. All of them know that you aren’t likely to want to go through the hassle of opening multiple bank accounts to move funds around as rates rise and fall.

There are even businesses that will shop and move your funds around for you, if you don’t mind paying them some of your pocket change. One that recently sent me a solicitation charges $80 per $100,000 that it "manages" for clients each year. But for ATX Portfolio Advisors' clients, I have a better solution.

1. Open an account wherever you can get the best rate on your cash, give me a call if you would like some help finding the best deal.
2. Link the account through my reporting and communications partner, Blueleaf.
3. I’ll help you manage it by periodically letting you know if there is a better deal elsewhere and facilitating the transfer if you determine it’s worthwhile.

It’s that simple, and there is no extra charge for the service. That’s Fee Only (When You’re Up) Accountable Wealth Management. If you aren’t currently a customer and would like to “test drive” ATX Portfolio Advisors, get in touch and I’ll set you up in Blueleaf for free. It may even be better than finding Alexander Hamilton in your laundry basket.