Benjamin Franklin wrote in Poor Richard’s Alamack that “a penny saved is twopence dear”. I learned the saying as “a penny saved is a penny earned” which is apparently a misquotation (thanks Wikipedia). Regardless of how you say it, the adage holds true with investing and saving. I’ve noticed that my bank for more than a decade is not necessarily the best deal in town (or online). I’ve been a loyal customer due to my bank’s convenience, good customer service, and user-friendly website. However, the more I look under the hood I realize I could do better elsewhere when it comes to saving and investing.
For savings, I searched for a good APY for my emergency fund. While savings accounts provide terrible returns, not all savings accounts are equally terrible. I found two candidates for my new savings account: Barclays and Ally. Barclays currently provides a slightly higher APY at 0.90% vs. Ally’s APY at 0.87%. While these APY’s seem small in comparison to investment vehicles, they are still 5 to 6 times greater than my current savings account. I tried creating an account at Barclays first but was alerted at the end that I needed to call customer service to finish my application. I called and waited about 5 minutes and lost patience for the moment. Next, I applied online with Ally which receives good reviews on several finance websites. After a few minutes of completing the online savings account application, I was on my way to becoming an Ally customer. Just like that, I was able to increase my savings account returns by 5 times.
My next and greater frustration is with the commission fees of my currently unnamed financial institution which sit at almost $9 per trade. Again, with some quick research I found a lot of good competition available. I haven’t opened an account yet, but I’m leaning towards starting a new Roth IRA at OptionsHouse which executes trades at $4.75. That is almost a 50% savings. Once my transition is complete, I’ll lose the one-stop convenience with my current financial institution in exchange for savings and higher returns.
It feels good to save a little money with minimal effort. You have to appreciate the competitive options that the online environment has created.