This morning I wrote "$4.92" in pencil on the fridge calendar, in the little square for Saturday, September 13. That's how much interest our savings has built up in its first three days at the new account. It won't post until the end of the month, but the app shows it adding up a little every day. Tyler looked at it over his coffee and said, "That's it?" Then I showed him what we earned all of last year, and he stopped asking.
What the bank in town paid us
Until this week, our emergency fund and our house fund both lived in savings accounts at the bank in town where we have our checking. I like that bank. The tellers know us, they count the coins from our jar for free, and when I call, a real person picks up.
But their savings accounts pay 0.05 percent. For all of 2024, on everything we had in savings, we earned $3.18 in interest. Not $318. Three dollars and eighteen cents, for a year of letting them hold several thousand dollars of ours. This year was no better. From January through August, the house fund earned $2.61 there.
I knew the rate was low. I just never did the math until July, when we split our savings into two accounts and I finally looked at what each one was earning. The answer was nothing, rounded.
What we moved and when
On September 2, I opened two savings accounts at an online bank. It took about 15 minutes on the couch. Before I did, I checked three things: that the accounts are federally insured the same way our local bank is, that there are no monthly fees or minimum balances, and that I could link our checking account for transfers.
On September 8, I moved everything. It landed on Wednesday, September 10:
- House fund: $12,274.01
- Emergency fund: $3,000.00
- Total: $15,274.01
The account pays about 4 percent APY right now. On $15,274.01, that's roughly $1.64 a day. Three days gave us $4.92. At 0.05 percent, the same money would earn about $7.64 in a whole year, so our first three days already covered more than half of that.
What the interest is worth in the first year
Here's the math I did for our first year, assuming the rate holds. That's a big assumption, because it's a variable rate and it can go down without anybody asking us.
The emergency fund just sits at $3,000. At about 4 percent, that's about $120 for the year. At the bank in town, it would have been $1.50.
The house fund is a moving target. It starts at $12,274.01, and two things feed it every month without anybody deciding anything. One is the transfer on the 21st, which goes up to $434 this month because the $42 from our subscription cleanup joins my old car payment and the phone and lunch money. The other is whatever's left in checking at the end of the month, which has been $200 since June. That's $634 a month. With just those, the average balance over the next twelve months should land around $16,000. At 4 percent, that's roughly $640. Mowing money, jar counts and a tax refund would only push it higher.
Together, that's about $760 in the first year, and probably more. If we'd left the same money at the bank in town, we'd earn about $9.50. $760 is more than two and a half months of my old car payment. It's more than our pickle jar brings in over a whole year, and nobody has to sort pennies for it.
It isn't all upside, so here's what I weighed.
Transfers take a day or two. Money in the online bank isn't sitting in checking, ready to go. For the house fund, that's a feature. For the emergency fund, I thought about it harder. Our plan: if the truck breaks down on a Friday, we put the repair on our credit card, move the money from the emergency fund the same day, and pay the card off in full when the transfer lands. No interest, no waiting at the shop.
Interest counts as income. We'll get a tax form for it next year, and we'll owe a little tax on it. If that part matters to you, ask someone who does taxes for a living.
I also had to re-point the transfer on the 21st and change where the month-end leftover and Tyler's Sunday-night mowing deposits go. That honestly took longer than opening the accounts. The transfer on September 21 will be the first one under the new setup.
Our checking account stays right where it is. So does our relationship with the bank in town. We still get cash there, we'll still bring the jar in to be counted, and if we buy a house in Macon, I'd like to sit down with somebody there about it. We just stopped asking them to hold our savings for $3.18 a year.
I'll report back on what the interest actually adds up to when we close out the year.
