You might want to aim high if any of the following apply to you:. Backup funds can also alleviate anxiety: An unusually large utility bill or small emergency expense is unlikely to cause a cascade of overdrafts. And the likelihood of a missed loan or credit card payment due to insufficient funds is relatively low. Even with a few months of expenses in the bank, it's important to check your account regularly to make sure you're maintaining your intended balance.
You also want to monitor your account for fraudulent transactions. In addition to keeping an adequate balance in your checking account, it's a good idea to have a separate savings account. Accumulating three to six months' worth of expenses—plus any savings you may be piling up for discretionary spending—can take a bit of discipline.
Setting aside a dedicated percentage of each paycheck is one way to create a savings routine. Many financial institutions also have automatic savings services that will sweep money from your checking to savings on a regular basis. Also key: Don't raid your savings account to cover everyday expenses. When you do use savings to pay for emergencies, build it back up as soon as you're able. Although savings accounts may not seem like the most exciting financial products to shop for, there are differences between accounts you may want to consider.
In June , starting interest rates on regular savings accounts hovered around 0. A typical high-yield savings account , on the other hand, might offer around 0. Sometimes, these fees can be waived by maintaining a minimum balance or linking multiple accounts. When you're ready to start saving, shop around for a bank account. Some of the best rates and terms on high-yield savings accounts are with online banks like Marcus or Vio Bank, but many banks and credit unions also have high-yield accounts.
Look for accounts that enable you to bypass monthly fees as well. Best Places to Store Additional Cash Once your checking and savings accounts are amply funded, it may be time to explore additional options. With basic transaction and savings needs covered, opportunities to earn more may be available to you. But moving extra money to a savings account, which typically offers a higher interest rate , could be a good idea. Growing your checking account to that point is a vital second step.
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For personal advice regarding your financial situation, please consult with a financial advisor. More cash in your checking account isn't always better. But what about our checking accounts? Most of us use these accounts on a daily basis. Every swipe of a debit card, every bill we pay, and every personal check we write takes money out of our checking account.
How much money should we be keeping in these super-convenient accounts? Some experts recommend adding 30 percent to this number as an extra cushion. A checking account is best used as storage for the money you use every day, but for all other purposes, there are better places for your cash. For money you want to save for future use or emergencies , put that cash into a high-yield savings account where it can earn a bit more interest than it would sitting in a checking account.
Cole points out that there are opportunity costs with keeping large checking balances, beyond just the temptation to spend. A high-yield savings makes sure that you aren't missing out on higher earnings. Top-rated high-yield savings accounts offer an above-average APY to all customers no matter your balance , are FDIC-insured , have zero monthly maintenance fees and low or no minimum balance requirements.
It is the most straightforward savings account to use when all you want to do is grow your money with zero conditions attached. If you've already built up a few thousand dollars in emergency savings, consider putting half of those savings in CDs , suggests Achtermann.
With a CD, you have a chance to earn a higher interest rate in exchange for keeping your money tied up for a certain period of time, with term lengths ranging between three months and five years. On the date that your CD matures, or when your term length is over, you get your money back, in addition to the interest earned over time.
If you can keep your money untouched for five years, we recommend the Ally Bank Five-Year High Yield CD because it compounds interest daily and there is no minimum deposit to open an account. Once you have a stable amount of savings set aside and zero outstanding high-interest debt like credit card debt , invest the rest of your surplus cash from your checking account.
This fund tracks the U. It's passively managed and the expense ratios are a super-low.
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