Higher interest rates have some people in a panic. Getting a loan or anything right now is going to cost you a lot down the line. Is there a way we can actually take advantage of it and maybe stick it to the man?
Probably not but it can’t hurt to get a few slugs in there.
A mortgage is probably the biggest loan you’ll ever take out other than maybe for your startup business focused on targeting pet owners with nothing better to spend their money on. What parakeet owners couldn’t resist an online bird therapy session?
Mortgage interest rates are significantly higher right now as well, but so are the interest rates at your bank. This is something we learned about a few years ago and haven’t looked back.
Not enough people take advantage of higher interest rates at certain banks
You might laugh at the idea of bank interest rates having any significance in financial success. Many banks offer an interest rate you’d need a microscope to see. Chances are, you don’t even get a tax form for the bank interest you get from most places.
In 2020, Jenny and I discovered that there is a way to actually make some decent money through banks that doesn’t involve a ski mask.. Many online-exclusive banks like Discover or Ally are able to offer much higher interest rates to their clients because of less overhead. They don’t have any brick and mortar locations which cuts down on the cost of things like cleaning a lobby or supplying their employees with presentable work spaces.
The interest rate in our account–where we have for our emergency fund–has bounced around a lot in the nearly three years since we opened it. During the pandemic of 2020 when interest rates were lower, we were getting more than we did from the more well-known banks but nothing significant enough to get all that excited about.
Now, in 2022, with the federal government trying to balance inflation, a tanking stock market, and everything else they have on their plate, higher interest rates have returned. Some banks, including ours, are now offering over 2% interest on savings.
Of course, you need significant money saved up to actually benefit from a 2% or higher interest rate. $100 in the bank will only yield you $2 over the course of a year. It’s free money yet nothing wonderful.
Having $20,000, however, will at least pay for a month’s worth of groceries or more. That’s a free $400 a year just by parking your money somewhere.
Higher interest rates at your bank won’t help you retire early or become a millionaire overnight. No one single action will ever accomplish those goals. What it can do is continually add to your emergency fund even if it’s just a few dollars each month.
Everyone should have at least one bank account somewhere that typically has a high interest rate. It’s the best place to park money you don’t plan on touching. In an economic downturn like the present days where the stock market is shrinking, you can at least have a little protection by seeing the savings you do have increase.
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The book that convinced us to start investing and being more proactive with our money and lives: The Only Investment Guide You’ll Ever Need by Andrew Tobias
The gear we use to make our YouTube videos at the Practically Humans YouTube Channel
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