The author, Jen Glantz. Courtesy of Daphne Youree
I regularly move my money between different high-yield savings accounts and certificates of deposit to get better interest rates.
It can take me a few hours to move everything and I have to follow a specific plan.
Moving my money always involves some risk – I have to accept that I could miss out on a better opportunity.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by an editor.
Five years ago, my partner and I decided to open up about our finances to each other. We sat down together and shared all of our assets, accounts, and even our money goals. Within minutes, my partner shared two huge “red flags” he saw in my portfolio.
First, he noticed that I had an extremely large amount of cash and no investment accounts. Second, he saw that my money was in a savings account that barely earned any interest.
He then explained to me the concept of high-interest savings accounts and savings bonds. If I chose the right banks and accounts at the right time, my money could earn a significant amount of interest.
Since then I am no longer tied to a specific bank. Instead, I move my money between different high-interest savings accounts and savings bonds every few months, depending on where I can get the best interest.
Over the years, I’ve earned thousands of dollars in passive income this way because I’ve been able to find interest rates that often exceed five percent.
After using this strategy for a few years now, here are the three most important lessons I’ve learned.
1. Moving money takes time
While it may seem intriguing to move your money from one bank to another depending on where you find the best interest rates, it’s not always a smooth process.
Since I’m typically moving thousands of dollars at a time, I need to be sure I’m making a wise decision before taking the plunge. I first spend a few hours a month researching different banks and the interest rates they currently offer on HYSAs (high-yield savings accounts) or savings bonds. If I have never heard of the bank, I spend even more time making sure that these accounts are FDIC (United States Deposit Insurance Fund) insured so that I can get my money back if the bank goes bust.
If I decide to move my money, it takes an extra hour or two to set up new accounts and make these transfers.
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2. I have to think strategically
One of the main reasons I move my money so often is because I want to earn as much interest on my money as possible without taking on too much risk. That’s why I try to have a solid plan in place before moving my money into a new HYSA or savings bond.
For example, before I transfer my money from one HYSA to another, I make sure the variable interest rate is at least two percent higher than what I’m currently earning. Interest rates are constantly changing, meaning they sometimes get lower. This way I can make sure the change is worth it.
If I decide to move the money from a maturing savings bond into a new savings bond at another bank, I look at my overall financial strategy and short-term goals to make sure it makes sense to keep the money in a savings bond for another twelve months . I’m considering whether I should invest the money in another investment, for example in an index fund, a real estate project or a company.
3. I have to accept that I could miss a better opportunity
In the past, when I was strategic and moved my money between different HYSAs and savings bonds, I could earn thousands of dollars in passive income, but that’s not always the case.
There were times when different decisions could have resulted in more money.
For example, I once put thousands of dollars into a 12-month savings bond that paid 4 percent interest. A few months later, I was offered a peer-to-peer loan that would have earned five percent interest on the money. The risk would have been greater, but the payout could potentially have been higher than what I earned with the savings bond.
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Read the original article Business Insider.
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