Woman erasing blackboard
Barry Rosenthal/Getty Images

Overspending and barely saving? Join the club.

Many of us would love to have an adequate savings cushion or a bigger rainy-day fund. And for those of us who aren’t living hand to mouth, perhaps we could. A few tweaks and some slight adjustments could potentially make a big difference.

Recent surveys have revealed some of Americans’ silliest savings mistakes. Ditching some bad habits and making small changes could help you get a step closer toward reaching your financial goals.

1. Not knowing your interest rate

Savings rates are nowhere near what they used to be. But now that the Federal Reserve is in rate-raising mode, there will be an opportunity for savers to earn more interest moving forward.

There’s no reason to wait to open a new savings account. But it’ll be hard to pick out a better one if you have no clue how much interest you’re currently earning. Among folks with a savings account, 52 percent don’t know what their annual percentage yield is, according to a recent PurePoint Financial survey.

“(They’re) not necessarily equating the impact of what they could earn on savings on their day-to-day purchases or even having a sense of that,” says Maha Madain, PurePoint Financial’s head of enterprise marketing.

2. Assuming checking and savings accounts pay the same yield

PurePoint’s survey of 2,000 people found that about 2 in 5 think their checking and savings accounts offer the same amount of interest. Of course, whether that’s accurate depends on who you’re banking with.

The average savings account pays 0.09 percent APY, according to Bankrate data. And Bankrate’s latest checking and ATM fee survey found that the average interest-bearing checking account pays 0.07 percent APY.

Those yields are essentially the same. But if the interest rate tied to your savings account is less than 1 percent, you’re missing out. In fact, a number of savings accounts currently offer a yield above 2 percent.

Start doing some research and you’ll see that you could easily be earning a lot more interest elsewhere, especially if you have a decent-sized savings cushion.

“Now is a particularly important time to shop around and make sure you’re getting the best return because the top yields on liquid savings are above 2 percent, which is the Fed’s inflation target,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “So the difference between shopping around or not is the difference between maintaining the buying power of your savings or languishing at some return that’s a fraction of 1 percent.”

3. Sticking with a low-yield savings account

It’s a shame just how many people are keeping their money in a savings account paying little to no interest. According to a recent Bankrate survey, nearly 4 in 10 respondents earn either nothing at all or less than 1 percent annually.

Only a small portion of participants in the survey (6 percent) said they’re earning some of the highest yields that banks offer.

Survey: What Americans are earning on their short-term savings?

“It boils down to either just being sloppy or complacent with your cash, in which case it’s really not a function of interest rates as much as it’s the old ‘I haven’t gotten around to it yet’ excuse,” McBride says. “In other cases, it’s just the fact that for a lot of people, they’re undersaved. They don’t have much in the way of savings. And so even a better yield is not going to generate much in the way of additional interest because they don’t have much in the way of savings.”

4. Letting money sit in a checking account

Another bad move many of us are guilty of is treating our checking accounts like savings accounts. The average American has nearly $5,000 sitting in a checking account or digital wallet, according to PurePoint Financial. That’s not smart, considering how little checking accounts pay, even if they’re interest-bearing accounts.

It’s possible to find rewards checking accounts paying more than 3 percent APY. But you’re not going to earn that much interest without paying your dues. You’ll have to meet some requirements, like using your debit card a certain number of times every month. That’s why you’re probably better off with a high-yield savings account.


5. Bypassing online banks

Opening an online bank account is the easiest way for savers to earn more interest. Online banks offer yields that are more than 20 times higher than the national average. But in a Bankrate survey, more than half of the participants (58 percent) said they either don’t currently have an online savings or money market account or they’ve never had one before.

According to Ally Bank, keeping savings at brick-and-mortar banks costs consumers billions of dollars of unearned interest annually.

“Better is out there, and they’re missing out by not taking another look at their finances and what online banks can do for them,” says Anand Talwar, Ally’s deposits and consumer strategy executive.

The issue prompted the bank to launch a new campaign that ended Sunday, it’s largest weeklong promotion ever. New and existing customers who enrolled and move new money into an online deposit account could earn a 1 percent cash bonus, up to $1,000.

6. Not automating your savings

Getting into the habit of saving money regularly can be difficult. That could change if you can automate the process of socking away funds from your paychecks.

“Depositing funds into your savings account on a regularly scheduled basis — or ‘automating’ your savings — is an effective way to make savings an ongoing priority,” says Thea Mason, vice president of deposits at PenFed Credit Union.

But while there are many tools that’ll automate your savings, not everyone’s taking advantage of them. A survey of 1,000 adults released by PenFed found that less than half (48 percent) use automatic savings tools.

The survey also found that adults using automatic savings tools have $3,800 more in savings, on average, than adults who only use a banking app and $4,100 more than adults who don’t use an automatic savings tool or a banking app.

7. Borrowing from retirement savings

A not-so-silly mistake some Americans are making is tapping their retirement accounts prematurely. Nearly 3 in 10 have taken a loan, early withdrawal and/or hardship withdrawal from a 401(k), a similar retirement account or an IRA, according to a Transamerica report.

Needing to pay off debt or cover a financial emergency are the most common reasons workers borrow from a 401(k) plan or a similar account. But using long-term retirement savings to solve short-term problems may come back to haunt you.

“Given that it’s impacting their account size now, it can have a compounding effect over the size of the retirement account when they reach retirement age,” says Catherine Collinson, president and CEO of the Transamerica Institute and Transamerica Center for Retirement Studies. “So, for example, by dipping into their savings, they have fewer savings to grow and fewer savings to potentially benefit from the compounding of their investments over time.”