So you’ve cut down on spending, you’ve eliminated all of your consumer debt except for that credit card that you pay off every month. You’ve started saving money and you’re even contributing to your 401K in excess of your employer’s contribution but there is one aspect to building wealth that many people tend to overlook and that is the savings account.
I know what my nonexistent readership are going to say to me “But I have a savings account and I contribute to it, every month”. And while that is true let me pose one question, what is the yield on your savings account? For most people it is quite low, like really low, like lower than .5% annual yield. For most people the savings account setup is really an after thought, forgetting about until they have to withdraw money from it. In my opinion this is wrong approach to have, all of your dollars should be working for you and this includes your savings account.
In this low interest rate environment, savings accounts are not attractive investments, but tons of accounts do yield over 2% interest with some accounts even hitting the 2.5% range. Of course one does have to be aware as many of these accounts do have restrictions on how many times you can withdraw money in a given month, but in my opinion, with proper planning and a well funded checking account, these challenges can be mitigated. Also many of these banks have minimum balances that need to be invested as well so be sure to shop around at banks and find the account that works best for you.
Disclaimer: This is not financial advice and I am not a financial advisory or a investment professional. Any investment decisions need to be carefully considered with your financial advisory or investment professional.