How to Select the Best Performing Savings Account for Your Financial Goals

Welcome back to another episode on the Wealthy After 40 podcast. where we are going to be talking about where to put all of that savings. Last episode, we talked about your purposes and your why's. Hopefully you have defined those because there are several savings options, savings accounts that will support your various goals. So stay tuned for that. But if savings is a topic of interest to you, be sure to join my 90 day summer savings challenge. We're kicking off live June 3rd. The purpose of this challenge is to help you create a savings habit. So as you listen to this episode and the ones to follow, you'll understand why to save, where to save, but then those little habits that you need to create those savings. I know we've discussed it just a little bit last episode. But hopefully you'll join me. If you're interested, check out the link in my show notes or go visit my website to learn more and get registered. All right. So jumping into today's topic of all of our savings account options. So savings accounts are fairly liquid. The ones I'm going to be talking about today I will give, um, the different restrictions or things like that. But money that is considered liquid means that you have quick access to it. fairly quick access and when you do access it, it doesn't lose any amount. As we talk about the different savings accounts in today's episode, hopefully you'll get a little more clear on what that definition of liquid means. So to kick it off, we are going to start with the traditional savings account. This is typically found at any bank or credit union. It's in a brick and mortar building. More than likely is paying a lower interest rate than some of the others that we are going to talk about. But how does this savings account support you? Uh, this gives you access to money very quickly. You can walk in, withdraw it, and There's no limitations. You don't have to use the ATM, which, you know, has a limit pullout as well. So traditional savings account really are best for the funds that you need immediately to maybe invoke a next action. And what do I mean by that? For example, on my car insurance and my home insurance, I have a deductible of 1, 000. I make sure that my traditional savings account has this money in it. Um, if I were to have a flood in my house and maybe the, I'm not sure, I've never had anything like that happen. Thank goodness, and I know probably some of you had, but if they're like, we need to have you cover the deductible before we can do anything, right? Because I get that I need to do what I need to do, then I can go and grab that really easily and give that to him. I'm sure there's other methods of payment, but having that money right there supports that goal for me. If there's any instance in your why's, in your purposes from last episode, that support like the need of being able to run in somewhere, go and draw it and have it ready to go. Then that is where you need to be put, putting it, uh, get it out of your checking account is ideally what this, um, supports you in. The second savings account is a high yield savings account. The acronym, and you might see it out there, H Y S A, supports you in giving more interest, especially right now. It pays a higher interest than your traditional savings account. Where do you find these types of accounts? They are online banks. They are non brick and mortar. That is mainly the reason why they are able to pay you a higher interest rate. Right now, at the time of this recording, their interest rates are between four and five percent. Supporting you really well, As interest rates go up on loans, the interest rates will go up on these accounts as well. Take advantage of it. It's a great support. There is a restriction with the online banks with the high yield savings account is you are limited to the number of transactions you're able to make during the month up to six, and that is a withdrawal and a deposit. because of their purpose, because of them being able to create this, um, interest back to you. So, and also that you're going to probably experience at least 24, if not 48 hours before you have access to this money. being deposited into, you know, wherever you, you designate it to go, which is typically your checking account. So just remember those limitations, but it is a great place to put your emergency funds to put your vacation funds for things that you're, they're going to be sitting there for a while, right? We're not going to have to access them. Um, really, really quick. And even though I say emergency funds, these are for like car repairs. Again, if you have that, you know, deductible in your traditional savings, um, that will support you. If there's any extra you need to pay, that could come from this and you can make that request. So it's very important as you're structuring where your money is going to think about it. Remember your purpose. Remember, um, how quickly you're going to need to access that. And then that will help you determine which best use accounts. I'm trying to give you some examples, some ideas. So as we're continue going through this, just make note of what sounds good to you and what fit with your why and your purpose. All right, moving on to the third type of account, savings account is a money market account. These are usually at your banks and credit unions as well. They are different than a savings account in that they are typically paying a higher amount. You're not able to pay bills directly out of there. That is one of their restrictions. That is the benefit of keeping it there and that's why they're able to pay a higher interest rate on it so that you're going to have to transfer that out. There may be a delay. I don't have experience with money market. Beyond that knowledge. So just make sure you look at the delay and being that transfer to your checking account where you can use it. I've worked with clients who are taking advantage of this higher interest rate, but they don't recognize that the money they're putting in there is actually their bills money. If you are sticking your bills money in a money market account, it really should just go into your checking account. You're going to need to pay for it that month. There's no way in a sense that this is going to be able to make interest for you. That is why we need to create our savings and then get it working. The thing I failed to mention on the high yield savings account, Um, for me currently on the level of savings I have in there, I'm making about 100 extra a month and this can add up. So even if you are able to save 50 a month in this high yield savings account right now, that's 2. And while that sounds little, if you remember my motto, step by step, right, two plus two plus two, it can add up. Think about inflation. Think about the adjustments on prices and groceries during this past inflation time. If you are creating the savings, you're able to offset that, not 100%. interest has gone higher than the four or five, like high yield savings accounts are making, but it can start offsetting some of those things. So if you're participating in activities, because you have a coupon or, you know, when you go grocery shopping, you have to have coupons. This is a way to kind of sidestep that and create you some money, more cash flow without having to do anything. It's equal to that type of an activity. Hey Gen Xer, imagine a life where you control your money instead of it controlling you. Financial coaching can help you learn the basics of budgeting and saving so that you can live a life without debt, have your money work for you, secure your retirement, and build a legacy for your loved ones. Let's face it, spending hours of your time trying to figure out where your money went is not serving you well. I promise you, you don't have to keep dipping into your savings every month to pay those unexpected bills and expenses. What you really need to do is head to my show notes and book a free budget Q& A call So you're no longer burnt out from your budgeting intents and instead you'll be saving yourself time money and tears and Because you're part of my podcast family when you book a free call with me and mention wealthy after 40 You'll get a special 50 to 100 discount for my financial freedom jumpstart intensive tips Head to the show notes to book that call and enjoy the rest of the episode. Account number four is a certificate of deposit. This is one of two that I'm talking about that has bigger restrictions, bigger limitations, but can fit into your savings plan just as well. Again, if you align it with your purpose, align it with your goal of that money, for supporting you. So certificate of deposits are, the money is placed in there for usually six, can be 12, 18 months, you know, up to five years. They'll guarantee you this much interest rate, which is a great thing to have if you're early on to when interest rates fall, just aligning that up with a goal. If you're not looking to go on a family travel for two or three years because you have other things going on, you could take advantage of a certificate of a deposit and align that mature date up with your travel date and looking at those things. That's how those would best work. work and best serve you. I would not put emergency funds in Certificate of Deposits. This is more structured for growth and support on some of those other savings goals. If you did need to pull it out, the penalty for early withdrawal is losing your interest back. but you get your money back. It doesn't take more than what you put in. It just doesn't earn any interest. So be sure if those are a part of your savings plan that you line up your purpose and the date. Again, that's why it's important to define those goals and know when you want to do it and line that up with a certificate of deposit. They're paying pretty good money right now as well and definitely explore those. The last account I want to talk about is another one with restriction, with limitations. It is the health savings account, but it is also a very powerful savings account. If you are somebody who has, maybe your family, there's a family member who has a lot of medical needs, There's, you know, a high, as long as you have the high deductible health plan, you can participate in one. I'm not going to go into too much detail of this next episode. I have a guest, he is discussing, oh gosh, we had an amazing conversation for about 30 minutes and we dove deep into the HSAs. So I hope you tune in for that. But this is a pre tax. Savings goes in before your income is taxed and then what you can use it on is anything medical related. How do you define that? Go look up IRS requirements for medical deduction and they're the same. So go explore that, especially if you are somebody who has a lot of medical needs and you're paying a lot of money out, take advantage of that, that tax strategy of not paying taxes on it. It's spent tax free, it's invested, or not invested, it's saved tax free. We talk about investment within that account next episode. Your five. Accounts that I covered today are traditional. They're at a brick and mortar, either credit union or bank. Your high yield savings accounts. Those are online. You can google that. You can find everything out there, um, that gives you options. Your money market accounts, typically again with your checking and your credit union, certificate of deposits, those also are going to be found with your local credit unions. But they can also be found with your high yield savings accounts. institution, I would look there as well. Um, health savings account, again, we're going to dive into this next week, but these are typically through your employer, but if your employer does not offer one, join next week to learn how you can create your own health savings account, especially to benefit you tax strategy wise and support you in your medical savings goals. It's important to understand your goals to understand your savings account. I talked about it a little bit. Really exploring all of the different options, accessibilities, things like that. Some high yield savings accounts have savings buckets within them, so you put the money in there, but then you're able to divide it out to your multiple goals and look at it that way. What I suggest in being able to So, begin your savings is really prioritize what your need is, right? With your emergency funds, with those, um, unexpected expenses, those things where you want safety, security, and protection. Look at those, prioritize those, and then prioritize your goals. Which one do you want? If you want to go on a summer vacation right now, that's got to be at the top of your list. Make sure you're factoring in the desire of, you know, getting there sooner than later. And you can definitely, you know, strategize to create that plan to cover all of those things. A few factors to consider when choosing a savings account. Now this is relative to any of them. interest rates. But again, with that, I know mine was the highest when I signed up for it. It's about middle of the road now. They fluctuate. You can jump in at the highest one right now. It will fluctuate and you know, they kind of take their turn on the top of the list and the bottom of the list. So more than just that, make sure there are no fees. Make sure there is easy access. Make sure your online banks have an ATM system that you can get the money through. Read the fine print. Make sure there's not something in there that doesn't align with you, that doesn't make sense to you, that doesn't feel good, right? This is all about trusting the gut. Um, understand the terms and conditions of each account. So if you're exploring certificate of deposits, you know, even your health savings account, make sure you understand the, um, limitations, those things. types of things as well. If you liked what I was talking about, about savings buckets with high yield savings account, if that appeals to you, make sure you find one that supports that as well. So those are just a few things to really consider when choosing a savings account. Read through their reviews. Read through their website. See what people are talking about. See what they're sharing. Um, if they have a nice website, then more than likely their portal is going to be great. Um, and really Explore and see and use that as part of your rating system, part of your determining if that is going to be the best place to go for you. So don't just jump into something because I discussed it today. Do your due diligence and make sure all of this works and that you understand and that it feels good to you. We're into the action step portion of our podcast. Go back to your purpose. Define your goals. And what do I mean by that? Define the amount you need and define the timeline, the date you desire to get there. This will help you with that prioritization step. This will help you with understanding of how you need to tackle how much money, you know, and really exploring that and, and helping you see how to get there. Again, if you're looking for strategy of saving, Join my 90 day savings challenge. It will support you in these actions moving forward. The next action is really the action portion of this. So you've defined your goals and your timeline. Determine which savings account is best for you for at least one of those goals and open up that savings account this week. Get focused, get going. Why just listen to me talk about why not go and do. Choosing the right savings account is a dynamic process and will evolve as your financial situation changes. So don't overthink it today. Take the knowledge, take your gut check again and make the choice today and just realize that it may evolve as you grow, as your knowledge of savings grows. As you learn more about investing, this account could change. And while it's the best choice now, It is the best choice for now and you just need to take action. That is all I have for you today. Um, thank you for listening. And if you enjoyed today's episode, please take a moment to leave a review on Apple Podcasts. This not only helps me improve, but it helps reach more listeners like you. Getting the word out there, helping other Gen Xers be able to start taking the changes that they need to do to succeed in our next. I'm going to be talking about how to get started with your first phase of life. Again, for listening until next week. Thanks for listening. Every week, my goal is to help you get one step closer to financial freedom and making confident decisions. So your money starts working for you. Having a community of support is important to your financial success. I would love to have you join me in my free Facebook community, all things personal finance inside this group. And strategies to help you progress to financial freedom. If you have questions from today's episode or want to learn more, follow me on Instagram at Elevate Finances. If you're looking for personalized support to get your finances on track, check out my website at elevatefinances. us to learn more about how I can support you with one on one coaching. Thanks and have a wonderful day.