Do you know that almost half of black Americans are underbanked? Yes, even in 2023.
From 2010 to 2021, over 15,500 USA bank branches were closed. Majority-black neighborhoods have lost more bank branches than anywhere else. As an example, JPMorgan has closed significantly more branches in majority-black communities than in non-majority-black areas.
It may seem like our options are narrowing, but the truth is we can still make our money work FOR us.
If there’s only one thing you do this year, on your path to wealth creation, make sure it’s opening a high-yield savings account. This is the easiest and quickest thing to do to help counter inflation and keep more of your hard-earned income.
Interest rates are up and it's time to make sure your money works FOR you. Put any extra cash into a high-yield savings account to make sure you’re getting the most from your savings. Earning interest from savings accounts can be a great way to grow your savings over time.
Inflation VS Interest Rates
Do you know what effect Inflation has on your money?
With the current US inflation rate we are all losing 6.4% of our buying power every year. That’s right, $10,000 will lose $640 in value by the end of the year, simply due to inflation. With this in mind it makes sense to, at very least, earn interest from your savings rather than letting it erode in a regular bank account. (The Inflation Rate is currently at 10.10% in the UK and 7.2% in South Africa)
It is a good time to take advantage of the current rising interest rates. On May 3rd, the Fed raised interest rates by 0.25%, the tenth rate hike since the Fed began raising rates last March. And more interest rate hikes are expected this year.
As the Fed raises interest rates, banks are able to offer their customers higher rates on their savings accounts. Many banks are offering rates above 3%, a far cry from the 0.8% we saw 2 years ago.
Does your money work for you?
Start with even the smallest amount available, reinvest all interest earned and let compounding interest work for you.
Compounding interest refers to the process of earning interest on both the principal amount and the interest that has accumulated over time. In other words, as interest accumulates, it becomes part of the principal, and interest is then earned on the new, larger principal balance.
For example, let's say you have $100 in a savings account that earns a 5% annual interest rate. After one year, you would have $105 in your account ($100 in principal and $5 in interest). If you let the interest accumulate for another year, you would earn interest on the new, larger balance of $105. The interest earned in the second year would be $5.25 ($105 x 5%).
Compounding can have a significant impact on the growth of your savings over time.
What to look out for in a High Yield Savings Account:
Shop around for High-interest Savings Accounts and find the highest rates,
Many banks offer accounts with no minimum deposit required, so you can begin right away,
Look for an account with no fees or charges for low balances,
Online savings accounts allow for quick and easy transfers in and out, compared to CDs where your money can’t be withdrawn for a certain period,
Find an account with no card fees, and
Good customer support.
Make regular contributions:
The more money you have in your savings account, the more interest you'll earn. Start small. Instead of buying a daily cup of coffee, allocate the money to your savings account.
Even a $2 daily cup of coffee = $40 per month being added to your account.
Add compounding interest to the equation and, in a 3.4% yielding account you’ll have $530 by the end of the year. Make sure to make regular contributions to your account to maximize your interest earnings over time.
I discovered that a Chase Savings account is a terrible place to keep money, but I've found an Amex High Yield Savings Account with 4% APR and no minimums or monthly fees and quick and easy access. I try to 'store' my money here, until I need it. Even just a few days growing with interest will make compounding magic.
It’s never too late to start.
In fact, the sooner you start the better.
Opening a High Yield Savings Account is just one of the ways we make sure our money works for us. Another tool is to use Credit Cards to your advantage. Watch out for our next article to learn more.
Here are some banks currently offering high-interest rates: (Interest rates may change)
These links are not monetized. We have no intention to make money off these businesses but rather want to make sure you receive as much needed information as possible.
Greenwood is an online black-owned bank. Founded in 2020 to address a lack of banking services for people of color and representation of them in traditional banks. With no minimum balance and no fees, it has a 4.15% interest rate.
SoFi offers a high-yield savings account with a 3.75% interest rate and no monthly maintenance fees.
American Express offers a high-yield savings account with a 4.4% interest rate and no minimums or fees.
Lending Club offers a high-yield savings account with a 4.25% interest rate and no monthly maintenance fees.
UFB Direct offers a high-yield savings account with a 4.81% interest rate, but does have a $10pm charge for balances under $5,000.
Discover offers a high-yield savings account with a 4.15%interest rate and no fees.