Americans are saving more money than ever, yet interest rates are at an all-time low. If you're looking for the best place to save money, it might be time to stop saving with banks.

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A recent CNBC article states: "In the midst of the coronavirus crisis, many Americans are spending less and saving more. At the same time, banks are paying next to nothing on those deposits."

Are you, too, looking for the best place to keep savings but want to make sure you’re doing the most with your money? Today, we’re talking about this unspoken challenge from a fresh lens.

So if you want to learn about one of the best places to save money, so you don’t have to give up returns or resort to high risk in search of them… tune in below!

Table of contentsWhy More People are SavingInterest Rates and the Federal Reserve Decline of Customer ServiceBank Accounts and LendingTraditional and Alternative Savings Options ComparedWhere Is the Best Place to Save Money?Whole Life Insurance: Emergency Fund and Alternative High-Yield Savings AccountWhy isn’t it Mainstream?Common Savings Mistakes to AvoidBottom Line

Why More People are Saving

Americans are saving more money than ever, yet bank savings rates are at an all-time low. So, how does a scenario like this happen?

We think primarily, COVID-19 has been an eye-opener for the world. On one hand, workers who were affected by job closures have likely realised that they didn’t have enough money saved to fall back on. While a tough lesson to learn, the fact that Americans have been successfully saving more money gives us hope. After all, having money saved is what enables you to weather economic storms (and seize opportunities when things are going well).

On the other hand, business closures meant a lack of things to do. Movie theaters, aquariums, museums, restaurants, and shops all closed. Pretty much all indoor (and many outdoor) businesses had to shut down for a good portion of the year. This also means that many families turned to other alternatives for entertainment, in other words, free. Hiking, swimming, and being outdoors became more popular. Americans started saving more money by default because so many businesses put a halt to operations.

So not only are people choosing to create better savings habits, they’re also creating better spending habits. Now that you have the money, it’s time to ask—where is the best place to put your money?

Interest Rates and the Federal Reserve 

A tumultuous economy means changing interest rates. The Federal Reserve controls interest rates, and in order to boost the economy, they’ve lowered rates dramatically, almost to zero. Meanwhile, they’ve also pumped trillions of dollars into the banks. Now, banks are at a surplus - meaning that overnight lending between banks is down, as are savings rates.

In the past, banks would use high-interest rates and “prizes” to incentivize opening accounts at their establishment, appealing to people who were looking for the best places to save money. Now, with a surplus, there’s no need for banks to offer this incentive. High savings rates are the bank's way of broadcasting that they want your money, and they’re willing to offer something in return. Now, banks can lower these incentives almost to zero, because they aren’t relying on that money to come in.

We’re seeing a mismatch in supply and demand. While there’s a high demand for a safe place to store liquid cash, where it will also grow, there’s relatively low demand from banks for new accounts.

Decline of Customer Service

One unfortunate consequence of this low-interest-rate market is a decline in customer service. Because banks do not need new accounts, they are not incentivising new customers, which also means that there is no incentive for them to provide better customer service. Combine that with a high demand for saving and a pandemic, and the issue worsens. Lobbies are closed,