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When I pull cash out of an ATM, the receipt always says I have something like $100 in my account. Yeah, in my checking account.
The truth is I keep my checking account balance low on purpose. Because money in a checking account ain’t doing nothing but sittin’ like a bump on a pickle (#SouthernSayins).
I want my money to work for me. Every day, for years. Compound interest is a wonderful tool that can work for you – or against you. So make it work FOR you!
At the very least, keep your money in an interest-bearing savings account. Pay your bills from checking, then transfer the excess to a high-interest savings or investment account.
Whatever you do, stop using checking accounts to park your money!
In This Post
Get an interest savings account and/or an investment account to earn free interest
My financial strategy:
- Keep monthly expense money in a checking account (here are the best with no fees)
- Pay bills from that account
- Whatever’s left over, send half to a high-yield savings account (Amex Personal Savings has 1.9% APY!) and half to an IRA account (here are the best)
- Repeat monthly to pay bills, budget, and build short-term and long-term savings
And all of this is free to have and keep. You should have a free checking account, a free savings account, and Fidelity has several funds with NO fees or minimums.
Your money can literally earn more FREE money just by parking it in the right place. Even saving $10 a week would give you $520 at the end of the year ($10 X 52)!
If you saved it in an account with 1.9% interest for 12 months, you’d get another $10 added to that. And that could be the beginning of a healthy emergency savings account.
If you have extra money, put it to work for you. Never keep large sums in a checking account for extended periods.
Plus, it’s a good idea to have something in a savings account or saved toward retirement.
But that’s a lot of effort!
I’ve been trying to get my younger brother set up with a Fidelity Cash Management account – for months. I offered to set it up and let it sit there until he’s ready to use it. It’s free to get and there are no fees. But he doesn’t want one.
Finally, I asked him – why? Is it the psychological toll of having multiple accounts? Too much trouble to set up or switch auto-payments? Why keep a bank that charges fees when there are multiple free options?
He didn’t want to switch his account numbers and works a lot. I get it. But there’s no way I’m letting a bank charge me to access my own money.
I’d rather spend the few minutes it takes to switch account numbers one time than pay a monthly account fee for months and months.
Going back to that same $10 you could save – if you pay $10 per month in bank fees, that’s also $120 a year you’re giving to a bank to hold your money. Why on earth wouldn’t you rather have that earning interest in a savings account instead if you’re parting with it anyway?
Adding credit cards to the mix
To take it to the next level, an even better thing to do if you like to travel would be:
- Save money for a trip
- Get a travel rewards card and use points or miles for the trip instead
- Put the money you saved into savings or retirement account
Now that’s really saving money on travel!
Yes, credit cards are yet another piece of your overall financial puzzle (and everyone should have one). But it comes down to, more than anything, your mindset.
For those who think it’s too much trouble, I’d say… anything worth doing is gonna take work.
And when the end result is saving money or getting luxurious vacations for pennies on the dollar, the end definitely justifies the means.
I am all about:
- Saving time
- Saving money
- Traveling for free or really freaking cheap
Everything I write here boils down to one of those principles.
And yes, I use a lot of apps and stack deals and open new credit cards to earn bonuses because that’s fun for me. And I’ll admit: it’s a lot to keep track of. Mint.com is a literal godsend for seeing everything in one place, and I use FileThis to send all my statements to my Evernote account for easy review and storage (both excellent tools!).
I want all my money working for me. I never pay a dime of interest on my credit cards. And I’ll never pay junk fees to access my cash.
Get a a free checking account, park cash in a free interest-bearing savings account, and invest the rest in a retirement account. In this way, your cash always works to earn you more money with the power of compound interest. Never pay it – earn free interest instead!* If you liked this post, consider signing up to receive free blog posts in an RSS reader and you’ll never miss an update! And thanks for using my links to apply for new card offers!
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- Track your net worth with Personal Capital. Get a $20 Amazon gift card when you link an investment account
- Start a blog and learn how to monetize it
- Get a travel rewards card to earn points or miles
- Open a SoFi Money account to distribute your funds and get a $75 bonus - it's the best checking account out there right now (here's my review)
The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.