From HYSAs to CDs, Here’s How to Level Up Your Financial Savings

In light of certain global pandemics, financial experts are telling us to prioritize savings over investing at this time. But what does that truly mean? Pulling your money out of the bank and stuffing it in your mattress? Probably not.

We’ve already lectured you on keeping up with inflation and the expense of depreciation—complete with examples from Harry Potter! So our beloved readers know that keeping fat stacks of literal cash in a drawer is a bad idea.

But what can you do to cautiously save your money in a way that will both keep up with inflation and stay safe from the risk of stock market volatility?

Take my hand, children, and I will lead you up a ladder of ever increasing financial savings savviness with the following four savings methods.

Broke: The standard savings account

This is your grandma’s savings account. It resides at your brick and mortar bank and accrues interest at roughly the same rate at which the tectonic plates are shifting. No really: standard savings accounts generally have a laughably low interest rate, like 0.0005% or less. That means if you have $10,000 saved in the account, you’re earning… um, less than a dime. 

A standard savings account is also sometimes considered Baby’s First Bank Account by Fisher Price. They’re a safer method of socking money away than stuffing it in your mattress… but they stand no chance of keeping up with inflation.

But if you’re a wee baby broke bitch and you haven’t a bank account to your name, the standard savings account can be a good place to start. Just while you learn the ropes of banking. Here’s more of our advice on how to get yourself banked:

• How the Hell Does One Open a Bank Account? Asking for a Friend. 
• How Do You Write and Cash Checks? Asking for a Friend. 
• What’s the Difference Between Savings and Checking Accounts, and How Should I Be Using Them? 

Woke: The high yield savings account (HYSA)

By contrast, the high yield savings account (HYSA) is notably not your grandma’s savings account. They usually live online at banks like Ally and Barclays. Nerdwallet has a great list of the best online high yield savings accounts, ranked by a number of factors including interest rate and customer service.

What’s awesome about the HYSA is that it has a higher interest rate than that dusty old vault at your local bank branch. (Yes, I’m aware that banks don’t keep your money in neat little stacks on-site in the bank vault. I, too, have seen It’s a Wonderful Life.)

For example, at the height of the economy, my Ally account earned me 2.2% APR. (APR stands for “annual percentage rate,” the interest it earns every year. Think of it as a small rental fee the bank pays you for the privilege of getting to play with your money when you’re not using it.) That means that for the $10,000 I have squirreled away in the account, I’m making 2.2% of it back: another $220 a year.

Compare that with the pitiful APR I’d earn in the standard savings account. No contest.

Now, we are not currently at the height of the economy. And HYSA interest rates reflect that! They fluctuate with the market. Currently, my HYSA at Ally Bank is earning 0.5%. So that’s more like $50 a year. Still way better than the APR of a standard savings account.

… but I think we can level up these financial savings even more.

Bespoke: The Certificate of Deposit (CD)

Here it is: the elite savings method reserved for the strongest of financial paladins.

A Certificate of Deposit (CD) can either be online or at a brick and mortar bank. It usually has a higher interest rate than even a HYSA. But the catch is, you cannot touch the money for a set amount of time. When the CD “matures,” you get full access to the money you initially deposited as well as the interest. But until that point, you might as well pretend the money in the CD doesn’t exist.

So if you can afford to keep your hands off your money for six months to a year, the returns make it well worth it!

CDs usually have maturity terms of six months, twelve months, eighteen months, twenty-four months, up to five years, and so on. The longer the CD lasts, the higher the interest rate. So you could have $10,000 in a two-year CD at 2.8% and make $567.84. Or you could have $10,000 in a five-year CD at 3.1% and make $1,649.13.

Try getting that rate of return from the Bank of Mattress Firm.

CDs are called term deposits in Australia, and time deposits in other places. Apparently they’re called fixed term savings accounts in the UK? This paragraph has been my token attempt at being less Americentric. You’re welcome, Canada.

Even bespoker: The CD ladder

The CD ladder: the gentleman’s savings vehicle.

It can be online or at a brick and mortar bank. It’s a strategic network of CDs with increasingly longer terms. The benefit is that every six months or so, you’ll get access to the money, which you can then either use, or reinvest in a new CD, keeping the ladder going.

It can be an extremely lucrative way of increasing your savings over time, and it’s much more cautious than investing. The CDs are FDIC insured and you’re not subject to market downturns.

Here’s how they work: 

Step 1: Open a handful of CDs all at once. Let’s say you have $8,000 total, so you put $2k in a one-year CD, $2k in a two-year CD, $2k in a three-year CD, and $2k in a four-year CD.

Step 2: Renew and convert each CD to a four-year CD annually. So every time one of the original CDs matures, put that money into a new four-year CD.

Step 3: Profit. Every year, a CD will fully mature, and you’ll be getting the advantage of the higher interest rate on the longer-term, four-year CDs without having to wait a full four years for your money. Every time one of these bad boys matures, you can pull a little money out of it before starting a new CD.

The biggest pro to a CD or CD ladder is that you’ll get a higher rate of return than you will with a savings account. The biggest con is that you can’t touch the money until it fully matures. Or, you can, but only for an exorbitant fee that defeats the purpose of having a CD in the first place.

Which one is right for me?

If your current savings consists of an old subway token, some Chuck E. Cheese tickets, and three wooden nickels, then a CD ladder, let alone investing, probably looks laughably out of reach. Which is why it makes sense to start slow, with a small savings goal, and work your way up through more and more efficient savings vehicles.

So focus first on building a nest egg in baby’s first standard bank account, if that’s where you are. No shame! We all start somewhere. Here’s the patented BGR savings goal coloring book, which should help.

From there, I highly recommend keeping an emergency fund in a high yield savings account. It’s cautious, liquid, and easily accessible at any time. It’ll just about keep up with inflation without being beholden to the volatility of the stock market.

Then, when you have a comfortable amount of funds you can afford to lose access to for months and years at a time, open your first CD! Remember to keep some funds in that HYSA as an emergency fund. Because even in the event of disgustingly exorbitant hospital bills, you’ll still owe a steep fee if you need to access your CD before it fully matures.

If you like the experience of having a CD and you were easily able to muddle through without access to your money for long periods of time, consider starting a CD ladder! Then don some sick shades and ride off into the sunset like the money-saving badass you are.

Get a ‘lil help from Acorns

If getting your shit together and saving even a tiny amount on a regular basis sounds like a headache… I get it. That’s why we recommend automating your savings through a micro-investing tool like Acorns.

Babies… we fucking love Acorns. In my humble opinion, it’s a great option for beginning investors and anyone having a hard time saving. I’ve personally been using Acorns to save and invest my little savings for years now, and it is well worth the tiny monthly fee. Which is why Acorns is our very first sponsor here at Bitches Get Riches. That’s right! They’re that good.

Here’s how she works:

• You sign up for the Acorns app. It takes less than five minutes.
• Link your credit and/or debit card to Acorns.
• Every time you make a purchase, Acorns will round it up to the nearest dollar and not only save the difference for you, but invest it in the stock market.
• Go about your business, blissfully saving your littlest savings—and earning interest on them—without lifting a finger.

Note the whole “invest it in the stock market” aspect of Acorns. Every dip into the stock market comes with a little risk. But with that risk comes reward! That’s right: micro-investing is one more level up in your savings strategy. It’s the galaxy brain of savings! It doesn’t just sock your money away for cautious, minimal interest. It earns you those sweet, sweet dividends.