Lessons Learned: Real Examples of Smart and Poor Savings Choices

When it comes to saving money, the choices we make can have a big impact on our finances over time. And sometimes, a decision you make on a whim could yield great results. Similarly, sometimes, a single poor choice could cost you in the long run.

I'll be the first to say I've made both in my day. Here are some of the best things I've done with my savings in recent years -- and some of the worst.

Smart choice No. 1: Putting (some) money into CDs when rates started rising

The Federal Reserve started raising interest rates in early 2022 to fight inflation. Once I saw rates on certificates of deposit (CDs) start to rise, I immediately moved some of my regular savings into a CD to snag more interest on my money. But I didn't move all of my non-emergency savings into a CD. And that was key.

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I suspected that the Fed was probably going to move forward with a series of interest rate hikes -- not because I'm so smart, but because I read the news and that's what all the experts were saying. So I waited to move additional funds into CDs knowing rates would probably get even better -- which they did.

The upside of CDs is that you can snag a higher interest rate than what a savings account might pay. But also, you're committed to that rate. So it's usually a good idea to set up a CD ladder where you have a bunch of smaller CDs coming due at different times than a single large CD. That way, you don't miss out on better rates when they become available. You also potentially lower your risk of having to cash out a CD early and get hit with a penalty.

Smart choice No. 2: Shopping around for a better savings account rate

Once interest rates were steadily on the rise, savings accounts started paying more generously. Since I'm self-employed, what I do each year is keep earnings in a work-specific bank account for easy tracking and wait to transfer my profits into savings once I've settled my yearly tax bill. When that happened this past April, and I realized I had some money to move into savings, I didn't just roll it into my go-to bank. Instead, I shopped around.

In doing so, I was able to score an APY of over 5% on my money. My go-to bank was paying closer to 4%, which isn't a bad rate for a savings account, but it's not as good as 4%.

If you have money to move into savings, it always pays to take a little time to shop around. Right now, for example, UFB is offering up to a 5.25% on its UFB Secure Savings Account. That's just one of many options you may want to look into.

Poor choice No. 1: Letting a maturing CD roll into a new one with a less favorable rate

A while back, I had a CD coming due. All I had to do to cash out that CD was log into my bank account and say that I wanted to do that. Instead, I failed to take action. So what then happened was that my CD got rolled automatically into a new CD of the same length.

However, this was before interest rates started rising. So when my CD rolled over, I got stuck with an interest rate I wasn't happy with.

If you have money in a CD, mark its maturity date on your calendar. Then, as that date approaches, decide what you want to do with your money. If you want to cash out your CD and shop around for a better rate, make sure to log into your account and arrange for that before it's too late.

Poor choice No. 2: Letting my checking account balance grow without transferring money into savings to earn interest on it

For a long period of time, before the Fed started with its recent interest rate hikes, savings accounts were paying an almost negligible amount of interest. Because of this, I wasn't so motivated to move money out of my checking account and into a savings account. It was easier to just have a larger checking account balance and know that I had extra money on hand for bills.

But even though savings accounts weren't paying much a few years back, they were still paying something. And some interest is better than no interest. So keeping more money in a checking account cost me for no good reason other than pure laziness.

From now on, my plan is to really only keep enough money in my checking account to cover my immediate bills. If you have a checking account and savings account at the same bank like I do, it's silly to maintain a larger checking account balance. That's because you can usually transfer funds from one account to another instantly, so there's no risk in having more money in savings earning interest. If you need a checking account boost, you can usually get one on the spot via a transfer.

We've probably all made our share of savvy choices and silly ones over time when it comes to money matters. I've shared mine so that you can learn from my wins -- and avoid the blunders I've fallen victim to.