In this article, I refer to financial products that aims to provide a certain rate of return, like savings or stablecoin accounts. I’m not referring to more fluid investments stocks or crypto, which can change at any time.
All things being equal—if someone offers to give you more money, would you take it?
You’d assume the answer is “duh, of course.” But actual behavior suggests otherwise.
When I talk to money coaching clients, a lot of them have thousands – sometimes even hundreds of thousands, sitting in a checking account that yields an abysmal 0.01%.
They could easily park it in a “high yield” savings account offering 0.5% APY. This is safe, FDIC insured, and literally earns 50 times the interest.
Or they could earn 500 times that with 5% interest from Worthy Bonds.
Or earn double that, netting 8-20% using stablecoins.
Or any other alternative investments vehicle that aims to help people make money.
Earning higher interest is like giving yourself a raise for free. So I’m shameless about the number of financial accounts I’ve opened. It wasn’t until writing about finance that I realized that this…was not normal.
I realized why so many people leave “free money” on the table.
Why people don’t take risks to earn more money
You never take me out anymore. We don’t do anything fun or remotely risky. I feel like we’re not growing anymore.—Your Money In a Low Yield Savings Account
By now you probably know why people don’t take otherwise obvious means to increase how much they earn: too many options and high perceived risk.
I get it. Creating new accounts with investments you’re not familiar with takes work. I took a long time to get comfortable with Stablegains.com before I was comfortable earning 15% APY with them.
But not trying also has a cost.
Scared investors think: “I just have to find a good place to park this cash.”
But every option seems too risky or takes too much time to research. Time passes. Before you know it, that money has been eaten up by inflation for the past few months, or even years.
The scared investor stays in the No Man’s Land of Low Interest.
Let’s change that. Let’s get more…interesting.
Make your money promiscuous: 3 mindset shifts
Finding accounts that earn higher interest is one of the easiest financial skills you can adopt. In essence, all this requires is a few steps:
- Find a new product that earns you higher interest. Even better if there’s a sign up bonus.
- Transfer money there
- That’s it! Rinse and repeat.
Why is this easier said than done?
Here’s are 3 reasons to make your money promiscuous.
Reason #1: Loyalty is overrated
Banking relationships are sticky. You might have grown up walking to the local BOA or Wells Fargo, or stuck with your college credit union that gave you a free football jersey.
These relationships run deep…and people stick with poor service even if new banks are free, won’t charge fees, and are more user friendly.
An estimated 96 million Americans have never switched banks, collectively leaving up to $42 billion in interest income on the table each year.
…Most Americans (42%) incorrectly think traditional banks such as Wells Fargo and Bank of America offer the best rates for savings accounts.Bank Loyalty by DepositAccounts.com
Humans can get used to anything. I consider overdraft fees a type of financial abuse, yet the poorest Americans (most affected by these fees) continue to stick around with their banks.
Stop being so loyal. Your money should be promiscuous and spend time with whoever treats it best. If that analogy doesn’t land for you, imagine your money as a mercenary hired by you to recruit more soldiers to help you reach financial freedom.
Loyalty prevents people from trying out options to earn more with their money. And speaking of trying out new things…
Reason #2: The Dangerous “All or Nothing” Mentality
There’s nothing that hurts beginner investors more than the all or nothing mentality. This is the assumption that you have to bring ALL your funds into a new investment.
This of course feels scary: “What if I lose all my money?” That fear leads to inaction.
The simple answer: start with a little, then transfer more money if you feel comfortable.
Let’s say you have $10,000 sitting in a checking account that earns 0.01% interest (very common).
- The checking account currently earns 0.01% interest, or $1/year on $10,000.
- You find a high yield savings account like Marcus that pays 0.5% interest.
- Start with 10%, or $1000 of your holdings. Even using just a tenth of your money, you are earning $5/year, or 5 times more.
After a few months of experimenting, you may feel more comfortable with the new account. You decide to bring more money there, or you chase higher returns elsewhere.
By the way…you can always hold onto your original accounts. There’s no need to empty it.
Your money can be in a polyamorous relationship with any number of accounts.
Reason #3: Percentages feel small
Percentages can feel insignificant compared to absolute dollar amounts. 1% may not feel like much, but $1000 feels more real. The mathematical outcome is the same, but the emotional response is different.
“Football is a game of inches and inches make the champion”Vince Lombardi, American Football Coach
The personal finance edition: Finance is a game of percentages, and percentages make the successful investor.
To financial beginners, the difference between 1% and 2% may not feel like much. To savvy investors, getting double the return is a huge deal.
It helps to anchor your returns to real life, tangible results.
If you have an opportunity to earn 5% interest, take two extra steps:
- What dollar amount does that translate to?
- What real things can you buy with that dollar amount?
- Bonus: how much would it take you to earn that money on your own?
For example, if that extra interest translates an an you’re able to earn an extra $1000, that could be worth 2 months of groceries.
You could also think: How long would it take me to earn that extra $1000 on my own? Investing can do it without much additional work.
Ready to make your money promiscuous?
Most financial beginners don’t consider themselves investors, along with other limiting money beliefs.
It’s easier to adopt the investor mentality when you simply ask: what is the job of an investor?
The only job requirement is to methodically move money around to grow or protect your portfolio.
As you accumulate more capital, the more important it is that you, as an investor, get good at capital allocation. One decision that earns you 1% more might not mean a lot now, but that skill becomes meaningful when you have another $10K, $100K, $1M and so on.
Some smartass said “If you can’t manage $10,000, you won’t be able to be able to manage $1 million.”
I find that hard to disagree with.
I’ll leave you with some action steps…
- MEASURE how much you’re earning in your accounts right now. A good starting point: checking and savings accounts
- RESEARCH key terms like “highest interest savings accounts.” You can do the same for “crypto interest” or “alternative investments.” Tools like NerdWallet are your friend.
- DECIDE how much cash you need in those accounts / vs you feel safe to move
- Bonus: Calculate how much more money you’d earn in these new accounts.
All of this can take as little as 30 minutes for the experienced or a couple hours if you’re just starting out. But it will get easier, and it’s like muscle memory. I regularly check how much my accounts are paying me (they’ll also send me notifications), so at any point I’m aware of interest rate changes and where my money could be earning higher yields.