We are on the final stretch of episodes covering savings accounts. I want to wrap up everything that we have covered over these last few weeks and go over how to choose the right savings account for yourself out of all of the accounts that I’ve mentioned.
We have covered 6 types of savings accounts – traditional personal savings account, high yield savings account, money market account, certificate of deposit, cash management account, and specialty savings account.
Understanding the basics of these accounts from what they are, how to choose one, the positives and negatives, and how to use this account will help you to make the best decision for yourself on what type of account or accounts to have. Listen to each account’s main episode so you know all of these important things.
While I discussed 6 different types of savings accounts, not all 6 are needed. You need to decide if one or two accounts will be enough and then look at what type of specialty accounts to have.
You want to clearly outline your savings goal. Do you want a $1,000 emergency fund? Do you want a 6 month fully-funded emergency fund? Are you saving for a new computer, a car, or a house? Do you have children and want to prepare for their future? Do you want to start saving for your future self? Not everyone will have the same financial goals as you do. The accounts that your friends and family have may be different than what you have.
From all of the accounts that I’ve gone over, I have a traditional savings account, high yield savings account, Health Savings account, and a Roth IRA. I personally put Roth IRA as a retirement account, but it is still a type of savings account. I found that these accounts are the best thing for me. I use my traditional savings account for any short-term financial goals or savings. I am saving up for a new phone so the money I have saved is in this account. I also have money saved for any one-off bills I know I’ll have in the future like my car insurance. In my high yield savings account, I keep my long-term financial goals savings along with my emergency fund. I’ve opened an HSA because I had the option at my last job and I’m saving that money for my future self. I have a Roth IRA that I max out every year to give me some extra money for my retirement.
Start thinking about everything you have learned from these previous episodes and think about how you might use that account. If you don’t see yourself with a CD or money market account then don’t get one! You do not need every type of account ever. You’ll never maximize your savings potential and you’ll probably forget about certain accounts over time.
If you are not sure where to start, I’d recommend a high yield savings account. I personally love my Ally High Yield Savings account. I don’t ever need cash, so this type of account is perfect for me. Ally is an online bank so they can offer higher interest rates.
With all things finance, deciding if saving one or multiple savings accounts is a very personal decision. Knowing what is right for you means clearly defining your financial goals. If you haven’t done that yet, I talk about setting financial goals in my first few episodes! Please go back and listen to those because this will really help you to decide what account to get. I also have a lot of free worksheets for those episodes to help you out if you are a visual person.
Let me know, do you think having more than 1 savings account is a good thing? I do, but only if it really fits your needs! Having more than one just to say you do isn’t a good reason to have more than one savings account.
Thank you for listening to this week’s episode of No Fear Finance! I put out new financial literacy episodes every Monday and put out financial tip episodes every Saturday. If you are new to No Fear Finance make sure to check out my other episodes.