Many people know the importance of having a savings account. These low risk accounts will help them to store up money for emergencies and opportunities. Along with the low risk comes a low annual interest rate. This does not set well with many, and they end up opening a new account when they see a slightly higher rate being offered. They start to chase returns, and subsequently end up with a large number of accounts open. Is it worth the time to try and get that higher interest rate? In the end, how many accounts do you have?
The thrill of getting the best deal out there often trumps common sense. It is human nature to want the best of the best. But often human nature is not completely logical. Just like those who invest based on their emotions, or those who open new credit cards in the hopes of getting a lower APR, there are those who open new savings accounts in order to get an extra .5% rate of return on their money.
If you have $50,000 in savings is it worth the effort to try and boost your interest rate by .5%? That extra half percent will only yield about an extra $20 per month. Sure it is $20 that you did not already have, but how much time did it take? Tracking down the institution that offers the rate takes time. Then it takes time to set up the account, transfer the money, keep track of all the accounts opened (and subsequently the login ID’s for internet banking) and especially to do the taxes at the end of the year. Each account will send out a 1099-INT in order to report the interest earned. All this work goes into earning less than $1 per day, if you can even find a savings that offers .5% over what you currently have. If it is less of a difference, the benefits are even less.
Chasing returns rarely pays off for the individual. Rather than open up multiple savings accounts, and deal with the headache each one brings, downsizing to just the few that are needed will keep your financial portfolio looking much cleaner. One account for health savings, one IRA, one 401k, one emergency fund, etc. will make sure you spend less time moving money around to the place it is earning the highest interest, and more time focusing on what you do best: earning more money to put into those accounts.