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Open Market V.S Saving Account

 I have had a lot of friends who have asked me, hey what is a better savings account XXX or YYY for returns and I give them the same meme face of “Are you serious?” and then I respond with hey if you want to collect pennies on the dollar then by all means put your money in a savings account. It is important to have a savings account as the place to store away nuts in case of emergency, just like a squirrel does for winter. The squirrel does not expect the nuts to multiply magically as much as his stomach would love that but that is the point of a savings account, at the end of the day it is a place for savings and not investments. Remember the game-changing rule of 50-30-20? Well a savings account is for savings. 

There are banks out there that try to entice savers with higher yields such as Ally Bank and Synchrony bank both offering a little over 1% yield. Now remember the rule of compounding? This 1% is not compounded but simple interest. Say you put $5,000 then after one year you would have $5,050 and after two years you will have $5,100.05.  Woot in two years you made a $100 that is not even enough money to go to Coachella for one day. And don’t forget; you owe ordinary taxes on the interest. This is a good way to go broke slowly!

Now, I understand you want that money to be safe, you see the market going up and down and don’t have the stomach to ride the crazy waves that is a stock, which is why you were looking at high yield savings accounts as you want your money to be safe, but there are other ways to have higher degree of safety and get a slightly higher return than the 1%.  All this comes with the mindset of how long you want the money to sit in the market. 

Possible Investments 

1. Municipal Bonds: Munis are bonds issued by local governments and their yields are tax free at the state level that you live in!

2. Corporate Bonds: Are bonds issued by corporations often they have shorter terms but higher taxable yields than munis

3. Municipal Bond Funds: Is a mutual fund that invests in municipal bonds, diversifying your portfolio and providing the same tax free income.

4. Treasury Bonds: Work with the interest rates of the government and are bonds that the government uses to borrow money and are backed by the full faith and credit of the US Government 

The Good, The Bad, The Ugly 

• Savings accounts are a great vehicle for saving money and will keep your money the most protected as opposed to the market. (Good) 

• Money that is put into the market has a risk of going down but over time markets tend to level out and your yield is higher, you are risking your principal but will be getting more return. (Bad/Good) 

• Getting less than 1% return on your money is essentially loosing money when you factor in inflation (Ugly) 

Overall as an Orca you have to be smart about your money, we are wise enough to know that the best place to hunt for seals is near their breeding grounds where they multiply, yes shallow waters means more risk for us but it has a higher rate of return then somewhere in the middle of the ocean where it is safer for us to swim and may or may not encounter a stray seal once in a while.

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