Uncomplicated Wealth-Building for Beginners: Savings bank account NOT good enough?

 

If I put 100$ in a savings bank account, I get 1 cent at the end of the year. Is this some kind of joke?!

Scenario: Last year Aparna saved 20% of  her salary every month in a savings bank account. To improve on it this year, she started cooking more meals at home and cut down on eating outside. Also being the smart girl she is, she cancelled her cable TV package as it was getting too expensive and got netflix and huluplus instead which were much cheaper and had the few shows she liked. These minor lifestyle changes allowed Aparna to now save 30% every month. She thought to herself: "Over a period of time the savings will add up and I can take that much wanted vacation to South America anyways, right? Why bother about more complicated investing?"

Well not quite! In 2015, the average savings bank interest rates are 0.01%. But we deserve better. The first thing one should do is to shop around for banks that pay higher interest rates. The big banks will never be the ones offering high interest rates but if you go to websites like: www.bankrate.com or even www.nerdwallet.com, one can find much better interest rates on savings banks some times 100 times or more than the typical big banks. It might sound like a small amount but remember the concept of compounding :) everything adds up! There are many banks that are FDIC insured meaning that your money is insured even if the bank closes down. 

Another simple way is Certificate of Deposit which is very much like a Fixed Deposit where your money is locked away for 6 months or a year or more and grows at a much better interest rate than what savings bank accounts offer. The bad thing about CD though is that you cannot do a recurring deposit. It has to be all at once.

So don't settle for the peanuts! As a first step prevent banks from harassing your savings and make the first move to higher rate banks and take that first baby step!