#146 - One Positive of Rates Rising
When I do a new financial plan for someone there are occasionally quick easy things people can do to save/earn a few hundred to a few thousand dollars. One of the more common opportunities that comes up, is utilizing a higher interest online savings account vs. a traditional bank.
As the Fed has raised interest rates, many banks (namely higher interest online savings accounts) are raising the rates they are paying on savings as well. There are several online savings accounts earning close to or over 2%. This is admittedly not an incredibly high return but given that it oftentimes only takes 5-10 minutes to set up these accounts, it is typically well worth the time and effort.
If you have about $15K in savings, you could earn $300+ for the year. If you have $200K in savings, you could earn $4,000+ for the year. Either one is well worth the 5-10 minutes it takes to set up the account.
Once you have set up the higher interest savings account, make sure you keep “cash” there instead of your checking unless you need money in the checking in the very near term. Banks do typically limit how many times money can be drawn out of a savings account per month.
Getting into the habit of using a high-interest savings account for money that you are wanting to keep in “cash,” can easily be tens of thousands of dollars as the years add up- well worth the 5-10 minutes it takes to set the account up.
Notably, I am not commenting on whether you should be keeping the money in "cash" in this short post just on something you can do with the "cash" if it would be sitting in a checking account or low-interest traditional savings account anyway.
The recent student loan cancellation announced by President Biden will be tax-free from a Federal level but not necessarily from a state level. Indiana is one of the states that will tax the cancellation. If you live in Hamilton County, Indiana and receive $20,000 of cancellation, you will pay about $850 in state and local taxes on that cancellation.
Thank you for reading!