“My bank earns 0.5% interest”

Ramit Sethi

Most big banks are looking wildly around wondering why young people are moving to high-interest savings accounts. Perhaps it’s because Wells Fargo’s interest rate is around 0.5% and they try to nickel-and-dime us for every small service. Sometimes, when I’m negotiating out of bank fees, I’m tempted to use a line I have never had the courage to use yet: “Do you know who I am?” But then I realize I’m a 24-year-old Indian guy with an ectomorphic body structure, and the phrase becomes a little less powerful.

You can be earning about 10x that money with a high-interest savings account. For more details, here’s how I set up my financial accounts.

But there’s a little more.

Get the right habits. First, some people wonder why they should bother doing opening up another savings account when they only have a few hundred dollars. The difference in interest isn’t really that much. But being young is about getting the right habits so that when you do have a lot of money, you know what to do with it.

A savings account is not enough. Stop being lazy!! Second, and this is more important, I’ve noticed that a lot of you are really satisfied with yourselves for opening up an ING account (now called Capital One 360). Good! We all should–it’s a great step in the right direction. But there’s a weird sense of, “I did it, now I’m done!” Guys, opening up a savings account is one of the earliest steps to getting rich. It’s the equivalent of an infant crawling 14 steps. Now that you’ve got one of your financial accounts set up, it’s time to start thinking about growth through investing. Earning 5% in a savings account is not enough.

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  1. Jonathan

    Bank of America has a cool deal where they’ll match everything you put in your savings account, up to $250. So I’m thinking of opening one and putting a little money in just to get that.

    Otherwise an online bank with 5% would be a better savings option.

  2. Ramit Sethi

    Are you talking about this program?

  3. Spender

    I have my finances set up the same as you. Wells Fargo for checking/short-term savings, ING for mid-term savings, and 401k/Roth IRA/few mutual funds for long-term/retirement.

    Wells Fargo literally pays peanuts for interest. Think I get about .47% on one of my savings accounts. It is partially because I usually have I have my finances set up the same as you. Wells Fargo for checking/short-term savings, ING for mid-term savings, and 401k/Roth IRA/few mutual funds for long-term/retirement.

    Wells Fargo literally pays peanuts for interest. Think I get about .47% on one of my savings accounts. It is partially because I usually have <$1k in it, but even at higher balances, the interest never compares to other banks. Of the brick and mortar banks, I'm kind of surprised at Citibank. They've had some nice interest rates on their CD and their eSavings accounts. They seem to "get it" while others still seem to hinge so much on "free checking, oooo... free online bill pay, oooo". As more people realize almost ALL banks offer those, they'll start finding the ones who actually offer valuable incentives, like high interest rates or BofA's savings plan.

  4. Jonathan

    Yep, same program. I use my debit card instead of carrying cash anyway, so I wouldn’t mind them rounding it up and matching some of it.

    Than again, this may be more of a hassle than it’s really worth. I could just take the extra money they take from me and invest it better myself. Duh.

  5. Idea Senator

    I like your idea of starting young to save money, but don’t you think the potential to save money vs income earned is higher in the thirties group age onwards. I realise of course there are exceptions to the rule, but what advice would you give to those who may have not saved money earlier but started to do so in the thirties and try to catch up on the “loss”. My question here is what percentage is the loss?

  6. Jennifer

    Ramit, you must be very short on time these days. I expected you to really lay into some of these big banks. A few months ago a saw a citi billboard with these words “Don’t sell out for a couple of bucks” and I wondered how many paintballs you’d figure that thing was worth.

  7. Carlin

    Starting young maximizes the power of compounding. I end up saving like 27% of my gross income between my 401(k) and regular savings account. I’m 24, have no kids, no real obligations, etc, so it’s easy now to find the money. And I spend too much on dining out, so I could save more if I wasn’t afraid of my cooking (is it done? screw it). I’m not bragging, just saying starting young isn’t hard. Banking my raises also gets me used to the same amount of money, so I’m not like “Holy shit, a raise, what now…NEW CAR!”

    It’s really easy when you set up automatic transfers (bank that raise). You just have to start.

  8. Jill Murray

    I have to jump in here and vigorously throw my weight behind this principle of starting young above all.

    I started VERY young, saving money from my allowance, lemonade stands, babysitting and paper routes. Obviously, I didn’t have a lot of money back then but interest rates weren’t bad.

    In my mid 20s, I made some calculated high-risk career decisions that required me to temporarily reduce my income by 50%.

    What allowed me to do this and survive? My 7-14 year old self bailed out my 28 year old self with those old “insignificant” investments, that’s what. (I rolled them over into retirement savings to claim the tax benefits.)

    Now I really must get off my lazy butt and take Ramit’s advice here about interest rates on mid-term investments so that my 30s don’t go down the toilet.

  9. Michaela Blackshear

    I have recently been elected as the treasurer for a college marching band service organization. I was wondering if you could give me any pointers or advice on how I can go about the organization getting an account that collects interest up and running. I don’t know too much about this stuff, but it seems like you’re a genius! Any help is much appreciated.
    Thank you for your time and any advice,


  10. Hiuloki

    View Your Accounts – Wells Fargo Online Banking Login . Wells Fargo Bank offers leading business banking and online banking solutions for small business and business owners. Really Awsoome article about “My bank earns 0.5% interest”. Thanks

    • Dipali

      i have 100000 in buiness loan