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3 Things 12-12

Thing One Is Your Money Hot Or Cold? In his musical hit from 1960, Smokey Robinson explained to us that he was told by his mama that he “better shop around”. While nobody is compelled by law (or their mama) to do so, it makes financial sense shop around in almost every relationship you have where you are a customer. A case in point is your savings account. While its main purpose certainly isn’t producing investment income, given current interest rates, it is still likely worth your time to consider how much your current bank is paying you to use your money. While the Federal Reserve has raised interest rates to levels not seen since the financial crisis of 2008, the five biggest banks, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., U.S. Bancorp and Wells Fargo & Co. paid an average of .04% interest on deposits in the 3rd quarter of 2022. During that same time period, high yield savings accounts paid an average of 2.14%. Comparatively, today’s high yield savings rates range from 3.25% to almost 4%. Still, the big, traditional banks hold about half of all deposits. The reasons boil down to convenience and habit according to Nathan Stovall, a principal analyst for financial sector data at S&P Global Market Intelligence who said, “People are willing to pay for convenience and simplicity…If you can retain customers without having to pay for them, that’s the name of the game. You want to attract as many low-cost, stable customers as possible.” Those low-cost, stable customers occupy the end of the spectrum known as “cold money” in the banking industry. Once you get them, you’ve likely got them for the long haul. At the other end of the spectrum are what bankers refer to as “hot money”, which describes those customers who shop around for higher rates. On that note, see Nerdwallet.com’s recently published list of the top ranking high yield savings accounts below:

  • SoFi Checking and Savings: 3.25% APY

  • Discover Bank Online Savings: 3.00% APY

  • Marcus by Goldman Sachs Online Savings Account: 3.00% APY

  • American Express® High Yield Savings Account: 3.00% APY

  • Citizens Online Savings Account: 3.75% APY

  • UFB High Rate Savings: 3.91% APY

  • Citi® Accelerate Savings: 3.25% APY

  • LendingClub High-Yield Savings: 3.60% APY

Incidentally, high-yield savings accounts at banks and credit unions are federally insured up to $250,000 per depositor, and many non-bank providers partner with banks for insurance. Accounts at banks are backed by the Federal Deposit Insurance Corp., while credit union accounts are backed by the National Credit Union Administration. This means that even if the financial institution fails, the government makes sure your money is safe and accessible. So what are you, hot money or cold? Either is fine but you may as well declare a side and force yourself to rationalize it.

Thing Two Saving On Home Insurance In A rising Rate Environment The Wall Street Journal recently published an article with tips for saving money on home insurance premiums. At the outset, the author points out that premiums have risen 9.3% from January 1, 2021 to November 25, 2022. In explaining the rise, he points out that, “Premiums are up in part due to inflation, supply-chain issues and labor shortages, which drove up the cost of home repairs and replacement. Damage from tornadoes, hurricanes, severe storms, wildfires, and other natural disasters are also boosting premiums over the long haul. Companies pass along on the cost of these higher prices and risks to consumers.” As an offset, the author suggests we all consider making the following adjustments to our policies: Raise Your Deductible “One way to cut your annual premium is to increase your deductible, the amount paid out of pocket for repairs before insurance coverage kicks in. The typical minimum deductible is $500 or $1,000. How much you can save after raising the deductible depends in part on where you live and what your state insurance department allows.” Consider Eliminating Some Coverage Think about ,“....reducing or eliminating the “other structures” bucket of coverage if you don’t have a free-standing garage, shed, retaining wall, pool or other items that would fall under that category. Call your insurer and ask if it will reduce or eliminate that coverage” Ask for Hidden Discounts “Find out when your insurance is scheduled to renew and make some calls before that date. Switching policies every year might sound painful, but it can save you money. For instance, Farmers Insurance offers a 1% to 5% discount to homeowners who get a quote and switch to Farmers at least seven days before their old policy expires. At Allstate, you can save up to 10% on your homeowner’s premium when you switch from another insurer.” Bundle Your Policies “Robert Kinsey’s home-insurance premium for his roughly 4,000-square-foot colonial home in Great Falls, Va., recently rose about 20% to $5,486 a year. When the retiree shopped around for a better rate, he was told by several insurers that due to rising home replacement costs, he should expect to pay more. He eventually decided to bundle his home and auto insurance, raise his deductible and drop his jewelry coverage. He is now paying about $3,482 a year.”

Thing Three Just A Thought “It doesn’t matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions.” —Jim Rohn

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