I recently revealed that I was laid off. With all of the reorganization going on at my previous company, I had a feeling it might have been coming. Luckily, this gave me some time to prepare, which I realize I was fortunate to be able to do. I did this by stopping my contributions to my Vanguard investors account, and putting the money I otherwise would have been contributing there into my savings account. My savings account doubles as my emergency fund, and I usually keep a balance of around $10,000, about half a year’s expenses. During my paranoid period of job insecurity, I upped the amount of money in this account to $50,000 (about 2.5 years’ expenses).
This was clearly overkill, but it was a symptom of wanting to be over-prepared. Some in the personal finance blogosphere would admonish keeping so much cash around, and advocate for having different methods of an emergency fund or financial safety net. Whether or not this was a financially foolish thing to do, it’s what made me feel secure, and when I was eventually laid off, I had a lot less looming over my head knowing I was prepared for an excessive period of time.
True, I may have been losing out by not having this money in the market, but I also wasn’t going to just keep this cash in a place where I wasn’t getting the most bang for my buck.
Whether you have $10,000 sitting around*, $50,000, or only $1,000, it’s a reality of life that you’re going to need to keep some cash on your hands. Where you keep that cash is up to you.
With this in mind, you owe it to yourself to find the best product for your money (or let someone help you find it—hi!), and start growing more green.
Introducing an Ally
A few years ago I decided to look around for banks that gave a better interest rate than the measly 0.05% I was earning at the time. I didn’t expect much, but I was shocked to find Ally Bank, which I believe had a 0.85% rate when I joined. I was excited to make the switch for that rate, which was higher than even most CDs available back then.
Ally Bank Rates Going Up
Since I’ve joined, Ally has raised their rate multiple times, sometimes several times a year. This year the Fed has begun raising interest rates, so it’s likely that Ally and other banks will continue to raise the rates they pay out to customers (CDs and Savings Accounts should start seeing better rates). Today, my Ally Savings account earns 1.60% annually! If inflation is estimated around 2%, that means my savings are only doing slightly worse than that. Not too bad, compared to the 0.05% my old bank offered!
If you think about it, I’m earning 32x on the same amount of money in Ally versus in my old savings account (a 1.60% rate is 32x a 0.05% rate). That’s a huge difference, and a huge loss if you keep your savings around in a low-interest account. With options like these available, you can’t afford to be missing out while these rates last.
The best thing about using Ally, is that I get this rate through a SAVINGS ACCOUNT. It’s not even a CD, or anything that’ll tie up your money. The only constraint is that you can only make 6 withdrawals a month. However, as this is my savings account, and not my checking account, I find that I almost never make withdrawals from it. Occasionally I move chunks of money from it to Vanguard, or to my checking account when it gets low.
Other than the AMAZING savings rate, here’s what I love about my Ally Savings Account:
- Transfers made in/out of Ally are FREE
- There is no minimum balance you have to keep (you make the same 1.60% yield on $1 or $1,000,000)
- There are no fees
- Interest is compounded daily, meaning that the maximum value is paid out to you as your interest makes you more interest
- They clearly show you on a calendar when your transfers will go through, and allow you to schedule transfers in advance
- They don’t spam my mailbox or email, I get a promotion once in a while from them, usually only on relevant products, or a notice when my rate goes up (yippee!)
- They are FDIC insured
- They have an API which means I can sync my account into Mint and Personal Capital
If you believe it’s a good idea to have a cash emergency fund, you should put it in Ally.
Do I like Ally suspiciously too much???
It might seem like I’m pushing Ally. I’ve been a customer of them for nearly 4 years, and I’ve been very happy with their product. At first, no one believed the rates I was getting and thought it was some kind of gimmick or risk. Ally is still around and going strong, and I’ve since convinced several friends and family members to make the switch.
I was not paid to write this article, I am simply a huge fan of getting the most return for my money. My friends and family who use Ally are impressed with them as well, and that’s why I’m extending my recommendation to you. The point of this article is to make sure you are getting the most cash back where you save your money. Look around at what options are out there (google search: highest savings account APY), and find the bank that fits your needs AND gives you the highest possible yield. For me, that’s still Ally Bank.
Some potential cons to Ally, depending on who you are:
- It is 100% online, so there’s no branch you can go to, and there’s no “Ally” ATMs
This hasn’t really affected me since my checking account is not with Ally, and is instead with a popular bank chain, and I do 99% of my banking and portfolio management online anyway. And with Ally you can use Allpoint ATMs for free if you need them; and Ally will reimburse you up to $10 a month for fees at other ATMs:“There’s no charge to use any Allpoint®ATM in the U.S., plus we reimburse up to $10 at the end of each statement cycle for fees charged at other ATMs nationwide.” – from Ally’s FAQs
- Their UI is a bit clunky
I believe they’re working on making it more modern, but I’ve never had an issue with the basic functions I’ve needed (transferring money) and have never had a glitch in any process, which is what is most important to me.
According to ValuePenguin, the average Savings Account rate in the US is 0.01%. If this sounds like your savings account, seriously consider moving your money, and get a better return for your hard-earned cash.
~ GMG
Have you switched your money to a savings or checking account with a high interest rate? Love your bank? Hate your bank? Please share in the comments below 🙂
* By “sitting around” I mostly mean not actively invested. Keeping your money invested in index funds is the simplest, most straight-forward way to growing your personal wealth.