Tag: high-yield savings accounts

Spending on a Goal

I reached one of my short-term savings goals back in December, and the time has come to spend that money! Though I am doing a no-buy year, my short-term personal finance goals still need to be funded for what I know I will need to purchase this year: travel and accommodations, moving and continuing to invest.

My goals are the reason I want to stick to my no-buy plan as much as possible. However variable they might be, compartmentalizing the amount I have to save in order to reach the goals has made the process easier, and it gives me less room to make excuses for not saving enough.

The Saving

This is the first time I have done a more intricate budget for a goal using the AAII PRISM Wealth-Building Process. Created by AAII Journal editor Charles Rotblut, PRISM is a five-step method for aligning my investing decisions with my goals. Whenever I need to be reminded of what I’m saving for, I return to my Prioritizing Your Goals worksheet.

I used my SmartyPig high-yield savings account to save the $2,000 I allotted for seeing my favorite band the Kills in New York. The idea is to accrue interest on my savings over time instead of moving $2,000 from my emergency savings into this goal all at once. I transferred three installments of $500 over two months into my SmartyPig account, and by the time I had enough saved to reach $2,000, I had earned about $15 in interest. At this point, I didn’t need to transfer as much money in my final installment to finish the goal. While I spend on this goal, the amount I haven’t spent continues to earn interest.

The Spending

Once I reached my goal, I started gathering up how much I had spent on concert tickets, transportation and hotels. When a group of these charges came due on my credit card, I moved money from the SmartyPig savings goal back to my emergency savings account to pay it off. I have my credit card connected to my checking and regular savings account, but I don’t want to connect any other accounts to muddy the waters. Logistically, even connecting my emergency savings account is one too many, but I have it as a backup in case of—you guessed it—emergencies!


After spreadsheeting it, I determined how much I had spent planning the trip and how much I had left over for food and anything else I feel inclined to buy while in New York. I can keep this number in my head whenever I spend $14 on a sad sandwich at the airport, or $20 on an appetizer at dinner. Even with New York prices, I don’t think I will spend the full amount that’s left over, which means there will be some money ready to go for my next short-term savings goal: moving!

The Psychological Tax

While having money saved specifically for this goal and spending it was the plan all along, there’s the psychological effect of spending on a goal to consider. Technically, I am lowering my net worth by spending money on this goal. Put into perspective, the entire amount saved is roughly 6% of my net worth. Before sitting down to write this (just kidding, I’m 100% still in bed right now), I decided it would be a good idea to beef up my savings outside of this goal. I calculated how much I could save and transferred some of it to my SmartyPig account, which is separate from the goal I have set up, and some of it to my LendingClub account for my intermediate-term goal related to property. This way, I’m continuing to save as usual so I can build more of a cushion while I spend down part of my savings.

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Reprioritizing My Goals With High-Yield Savings Accounts

About one year ago, I began my journey through the AAII PRISM Wealth-Building Process. Created by AAII Journal editor Charles Rotblut, PRISM is a five-step method for aligning my investing decisions with my goals. Though I went through the entire PRISM Process, I have recently been thinking about how I want to spend my money next year. This caused a shift in my goals, so in the words of Ron Weasley: “She needs to sort out her priorities.”

When I last performed the first step of PRISM, my short-term goals included amassing enough for ongoing lump-sum investments in my portfolio of index exchange-traded funds (ETFs) and saving up for international travel. My intermediate- and long-term goals were eventually buying property and funding my retirement.

I revisited the Prioritizing Your Goals worksheet, which makes it easy to visualize and plan for how much I’ll need for each of my goals.

In an exciting turn of events, my favorite band the Kills is releasing a new album this week, which means a tour next year! In their words, “it’s been a long time coming.” I’m planning to travel to see some shows so I can visit friends. International travel is still folded into the estimated cost, but I’m not sure if it will be as extensive as I previously planned.

At the beginning of 2024, I plan to do another portfolio assessment to see where my investments are at. If I make any changes, I will invest another $2,000 in my Charles Schwab brokerage account. However, if I don’t need to make any changes based on my strategy, I will be leaving my portfolio as is. That’s what makes this goal a lower priority than traveling, it’s more flexible. Sometimes the best thing to do with your investments is nothing!

I’m also planning to move next year. My current one-bedroom apartment has served me well for most of the pandemic, but I’m ready for a change. A new place in a new area (with a dishwasher 🤞) is in order. My estimated cost for moving includes first and last month’s rent, a security deposit/move-in fee and what I’ll need to pay the movers. I’m inflating this estimate a bit to account for the ridiculous rent prices I’ve been seeing.

Buying property in this economy has proved to be extremely difficult, so I changed my time horizon for this goal from three to five years to a range of five to 10 years from now. Who knows what the future holds, I could be living on the moon in 10 years! But I’m sure someone will still figure out how to charge me property taxes 😅.

My high-yield savings accounts are the primary investing vehicles for funding my short- and intermediate-term goals. My SmartyPig account is designated for my short-term goals: travel, investing and moving. I’m currently earning a 4.25% interest rate on my savings in this account, and SmartyPig has a goals feature that helps to gamify the saving process. I keep rounding up on what I think I’ll need just in case. So if I have money left over after paying for my highest-priority goal, it’s like a little gift I’m giving my future self, and the money will go toward my next short-term goal that needs to be funded.

The other high-yield savings account I have with LendingClub is for my solitary intermediate-term goal: buying property. With an interest rate of 4.50% on this account, I’ve saved about 25% of my goal. Though it’s designated for buying somewhere to live, I’ve been thinking of broadening the category for this account. If I choose down the line to not buy, I could use the funds saved up in this account for paying my rent. I could also use it to buy or rent a studio space for making art that’s separate from where I live.

I didn’t change anything to do with my retirement goal. For now, it will sit there looking at me like a joke until I can allocate more of my paycheck to my retirement account. Technically, my investment portfolio is also going toward funding my retirement since I’ll need all the help I can get. Even though this long-term goal feels so far away, I don’t want to lose focus on it just because I’ll always have more short-term goals. Hopefully, everything I’m doing to save while still being able to live my life and enjoy what I have will result in a retirement I don’t have to fear.

Check out AAII Retirement Investing for planning insights at every life phase.

One-Year High-Yield Savings Accounts Update

Shortly after I last discussed my high-yield savings accounts, interest rates increased again and haven’t showed any signs of slowing! On October 6, 2022, LendingClub increased my annual percentage yield (APY) to 2.85%; later that month on October 26 it reached 3.12%; and by the new year, we broke 4%! As of mid-March 2023, the APY is 4.25%—12 times the national average, according to LendingClub. For perspective, LendingClub was offering a 0.65% interest rate back in March 2022 when I opened these accounts.

My SmartyPig high-yield savings account is not getting as much love, but the interest rate is holding steady at 3.50%. When I opened my SmartyPig account, the interest rate was only 0.70% on my savings. I started a new goal with SmartyPig to have $2,000 ready to invest in my Schwab brokerage account by June 30 to correspond with my next portfolio review. Unfortunately, my SmartyPig goal didn’t come with a higher yield as it did the first time I set this goal back in the fall.

In total, I’ve made over $175 across these two high-yield savings accounts in the last year. Meanwhile, my investments have lost money since March 2022. When going through my transaction history to see how much I made on my savings, I saw the huge differences in interest payments that were a result of not only the increasing yield but also the compounding interest I’m making on my savings. The interest I’m being paid increases because there’s more money in my account to make interest on (like magic!).

Back in October 2022, I calculated my net worth for the first time. Since then, I performed a net worth checkup on a quarterly basis. My net worth has gone up by roughly $2,000 each quarter, which is directly attributed to how much I’ve been putting away in savings. If I wasn’t saving on a regular basis, and specifically if I didn’t have these high-yield savings accounts to make the most of my money, I wouldn’t have made as much progress on increasing my net worth.

Before writing this, I moved the $580 I have allotted for monthly savings into my regular bank savings account. Now that I can actually see the difference my savings are making to my overall wealth, I’m feeling more motivated to save. My goal isn’t to make the most money I can, but to be disciplined with the money I already have. As the many financial voices I have in my head keep telling me: Pay yourself first! It pays off.

Setting High-Yield Savings Goals

Last time I updated you on my high-yield savings accounts, interest rates were going up and so were my savings. Since then, my LendingClub account has increased the interest rate on my savings three more times!

Back in June, LendingClub raised my rate to a 1.05% annual percentage yield (APY). By the end of June, it was 1.26%, and at the start of August it went up to 2.07%. A few days ago on September 21, it went up to 2.25%. According to LendingClub, this is 13 times the national average savings account yield. When the interest rate was 2.07% at the beginning of August, I decided to transfer more money into the account. Through the end of August (September’s interest doesn’t hit until the end of the month), I had made almost $30 on my savings since I opened the account in March 2022!

My LendingClub account is designated for a future down payment on a house, so it’s a longer-term goal that I have more funds allocated to. My other high-yield savings account with SmartyPig is for saving money before it is invested.

Though I haven’t been contacted about the interest rate going up on my SmartyPig account, it has increased from 0.75% in June to 2.05% in September. Not too shabby! When I signed up for SmartyPig, one of its offerings was the ability to set savings goals. What I didn’t realize is that the interest rate is higher when I designate funds for a specific goal—2.25% (same as my LendingClub account)!

So, I set up my first official savings goal with SmartyPig, which is to have $2,000 ready to invest by the start of 2023. When I began investing in March 2022, that was my Schwab account’s starting balance. At that point, it was all I was willing to part with; I knew I should only be investing money I was comfortable losing. Since then, my threshold for losing money has increased (since the market has been down for most of this year). However, I also know that I’m in my investments for the long term, so the short-term ups and downs aren’t crucial to my end goal. Maybe 2023 will be a better year if people stop saying the world “recession”—don’t let the market hear you!

I’ll keep you updated on how this savings goal goes and when I solidify a better plan for transferring my savings to all of their different homes on a more regular basis. Half the battle is just figuring out what works for me and my money, the rest should be relatively easy (fingers crossed!).

High-Yield Savings Accounts: Where Are They Now?

While I may not be making money in my investments right now, my high-yield savings accounts are making me more than I’ve made in years on my savings!

The market is down. Even if you’re not in the market, I’m sure you heard. But I’ve been trained well by AAII; I’m not scared by the red numbers on my Schwab account. In fact, I’ve made friends with them! We’re getting brunch on Sunday since the market is closed.

You might also be hearing about interest rates lately, and the possibility of them being raised. One of my savings accounts just raised my interest rate! It was an email I actually wanted to see from an institution I keep my money with. My high-yield savings account with LendingClub is now yielding 1.05% per year, up from 0.65% when I opened my account. LendingClub also noted that there is no minimum balance for my account (before it was $2,500). This makes me excited to see what this account can do for me; it’s already made a whopping $6.44 since the end of March (compared to $0.13 a month on my regular savings account, we’re living like kings).

I recall Erin Lowry saying 1.05% is the best rate on the market in “Broke Millennial,” so I feel like I lucked out with LendingClub. But Lowry also says, “Online banks will routinely fiddle around with the APY on savings accounts. One month it’s 1.05 percent APY, and two months later it drops to 0.75 percent. It’s actually within the bank’s right to do this—but that doesn’t mean you should hang tight at your measly 0.01 percent rate with your current bank because another bank might change from 1.00 percent APY to something a little bit lower. Because 0.75 percent still crushes 0.01 percent.” It’s good to know that my interest rate might not stay at 1.05% forever, especially since interest rates are fluctuating in other areas of the economy.

So with this higher interest rate, I should probably add more money to my LendingClub savings account to take advantage of it! My other high-yield savings account with SmartyPig is also doing well, and I’ll be adding more money to it soon to make the most of the 0.75% yield.

If you want to know more about interest rates, AAII’s financial writers and guest writers all have much smarter things to say than I do—I’m still recovering from high school trigonometry.

Opening High-Yield Savings Accounts

Last time I wrote about savings accounts, I asked my Instagram followers if they knew the interest rate on their savings accounts. I gave them four options: 1) Yes, but it sucks; 2) Yes, it’s actually making me money!; 3) No; and 4) I don’t have a savings account.

I got 15 responses: Three of my friends said they know their interest rate, but it sucks; six said they don’t know the interest rate; and six don’t have a savings account. I would say most of my followers fall between the ages of 20 and 40, and some of those without savings accounts are either younger than me or not working full-time yet.

However, no one selected, “Yes, it’s actually making me money!” This didn’t surprise me, but it motivated me to continue my research and finally open some high-yield savings accounts.

First, I revisited SmartyPig, which still offers a 0.70% annual percentage yield (APY), or interest rate, on my savings. This account will let me save up to $10,000 at this high interest rate, but once I have more than that the APY drops to 0.45%. I decided to call this my “grower not shower” savings account, where I’ll put money before investing it so that I can make the most of it before its intended purpose.

Signing up for a SmartyPig account was easy, it just required my name, address, Social Security number and creating some security questions. At some point I was asked if I had lived at my current address for more than two years. When I said no, I was asked to also enter my previous address. Once I read the disclaimers, I was able to manually connect my current bank savings account to make a transfer.

Then I wanted to look at some high-yield options that gave me more flexibility with my savings. LendingClub now offers a 0.65% APY, higher than it was when I last looked into it! The only restriction is that I must have at least $2,500 in the account. I’m calling this one my “movin’ on up” savings account where I’ll be putting funds to save up for buying a place in the future!

Opening an account with LendingClub was slightly different than SmartyPig. I was asked to create a security phrase, and I was able to connect my bank automatically using Plaid. From there, I could designate which account I wanted to connect and choose the amount I wanted to transfer. There were many disclosures to read, but most didn’t apply to the high-yield savings account I was opening and were instead about LendingClub’s other banking and card offers.

I decided to open two different high-yield savings accounts so that I can maximize the yields across both, and because I want to keep my savings goals separate as Bola Sokunbi explained in “Clever Girl Finance.” For now I’m keeping my regular savings account with my bank, designating it for emergency savings.

I’ll keep you updated on how my plan goes, and as it changes along the way!

What Is the Purpose of a Savings Account?

In previous blog posts I described myself as a big saver, but I wasn’t much of one before I got my savings account. I opened my savings account back in 2016 after I graduated from college. I was working consistently and paying off my student loans, but my parents encouraged me to put money into my savings account because if I kept it in my checking account I was just going to spend it!

Savings accounts are basically your bank paying you to keep your money with it. I think of my savings account as a place to hold money before its intended use. The average savings account today has a 0.06% interest rate, meaning the money in your savings account will appreciate by that percentage over one year. It’s definitely not a place for my money to grow—I’m making $0.14 per month at most on my savings. Rather, it’s a place to accumulate money until it’s time for it to shine and fulfill one of my goals.

I learned from Bola Sokunbi in her book “Clever Girl Finance” that psychologically it’s better to separate savings for different goals into their own savings accounts to not only avoid confusion but to not feel that you’re being set back on your other goals when you need something for one specific goal. Right now I have money to be invested and my emergency savings in the same account, but they should really be in separate places so I can see my goals clearer. Thankfully they soon will be, but I also want to look into a high-yield savings account, which I learned about while dissecting Carrie Bradshaw’s financial situation.

First, it’s important to make sure that any bank you’re putting your money in is insured by the Federal Deposit Insurance Corp. (FDIC). This means that your money will be safe should the bank go under. You can check if a bank is FDIC insured here.

After some researching and reading reviews, I found a few candidates for my future high-yield savings account: Sallie Mae’s SmartyPig, Axos Bank, LendingClub and Discover. SmartyPig offers a 0.70% annual percentage yield (APY) or interest rate on my savings, but the caveat for this higher yield is that it only applies to amounts under $10,000. Once you have more than $10,000 in your SmartyPig account, the APY falls to 0.45%. Axos Bank can give you 0.61% per year up to $24,999, but after you hit $25,000 the APY is much lower at 0.25% and goes down to 0.15% on more than $100,000. LendingClub offers 0.60% APY for balances of $2,500 or more. Through AAII’s partnership with Discover, you can get 0.55% APY without any restrictions or minimums (this is higher than what you can get through Discover without being an AAII member). These are all high yields with good options—I would just have to decide which option fits each goal. Maybe I’ll end up having more than one high-yield savings account to maximize the interest rates for the amount of money I want to save.

On the topic of how much you should have in a savings account, I recall many years ago when someone told me that they couldn’t believe a person they knew had more than $100,000 in their savings account. I knew that having too much in a savings account was as bad as not having enough—the opportunity cost of not growing all of that money in investments outweighed having all of that money stowed away, and in a manner akin to stuffing cash under your mattress!

I will be revisiting this high-yield savings account research when I open one in the near future, so stick around for more of my investing discoveries!