After all you need to be prepared to join the higher tax club.
This is where banks are doing a real disservice to the customer. Current savings rates are downright criminal. Without the money in savings and checking accounts, banks can’t offer loans to individuals and businesses. Banks used to compete with one another for offering the best rates on savings, now they are competing in a race to the bottom.
If you really want to dive in on the subject check out this article. We won’t see higher rates of return on savings accounts and CDs until rates go up on things like mortgages and business loans. It’s the nature of the beast.
For the most part, a bank can offer whatever rate they want on a savings account. If one bank decided to suddenly start offering a 5% return on savings accounts, they certainly could do so.
The only problem is that it would be a really bad business idea. Banks want some deposits in their savings accounts, but unless they can lend out money at a higher rate than they are offering on savings accounts, they’re not going to make money. They’re going to lose money.
For example, let’s take a look at home mortgages. Right now, you can pretty easily get a home mortgage at 4 to 5% interest. In order to lend you that money, banks have to have that money (technically, they have to have a portion of that money because they can count the mortage payments they’re going to receive… but that’s a whole different issue) in their vaults. In order to have that money, they have to have people depositing their money into that bank, and in order to get that, they have to offer some return on that deposit. At the same time, they have to offer less of a return on that deposit than they’re able to make from mortgages. So, the rate they offer has to be somewhere above 0%, but somewhere well below the 3-4% they get on mortgages.
Thus, we have interest rates on savings accounts hovering around 1%.
Low orneriest raes will do the.
Can’t pay 5% to savers and charge 4% for a loan.
The math just doesn’t work out.
In order to get the returns in the calculator, you need to be in the market. Right now, there is no reason not to be. Especially with apps like Robinhood that allow for commission free trades without account minimums. Investing is simple and cost-effective, you just have to use the right broker. I closed out my E-Trade account after 10 years and moved everything over to Robinhood. Now I don’t get hit with fees when I buy and sell. The downside is I don’t get the research recommendations, but there are plenty of free tools to get that information on your own.
And there you have it.
I go with Fidelity and 7.95 trades and they offer decent tools to analyze stocks/bonds.
Nifty tracking such.
When you hit the magic number you get an account representative who pesters you.
Biggest problem today is that the fundamentals are so screwed up that its difficult to assess a real value and the impact of the Feds stimulation even going back 10 years is useless.