Personal Finance Strategies
Personal finance is something that is constantly on my mind because I’m always thinking about my financial well-being. I love the idea of retiring in my late 40s/early 50s. In order to get as close as possible to the idea of retiring early, I’m always wondering- do I have a good strategy? Should I change my strategy? What more can I learn? Where can I learn more? What is the easiest step I can take right now? One strategy that almost everyone agrees on is to pay off all debt then save 3-12 months of your salary as an emergency fund. Once the debt is paid off and the initiative of saving begins, the first question I ask is where should I park my money?
High Yield Savings Accounts
A strategy that is widely accepted is to hold money where it can reap some financial gain at a low risk and is liquid (assets that are easily converted to cash). There are many options available such as cash, checking/saving accounts, Certificates of Deposits (CDs), stocks, mutual funds and saving bonds. All are great forms of liquid assets, but in my opinion, the most liquid assets with the least amount of risk are savings accounts, specifically HIGH YIELD SAVINGS ACCOUNTS. You can withdraw your money in a short period of time and obtain a consistent small yield on a monthly basis.
Standard Savings Accounts
Years ago, I opened a bank account with Standard Federal which was acquired by La Salle Bank then La Salle Bank was acquired by Bank of America (Ok Derek, get on with it). Early on I was “saving” my money in my standard savings account (AKA lending my money to the bank for a pathetic 0.03% APY), which is essentially a free loan. Little did I know there are high yield savings accounts that offer a MUCH HIGHER annual percentage yield (APY). As of writing this, high yield savings account rates vary between 1%-1.6% APY. Let’s just think about this for a second, let’s say you have $1,000 in your savings account for a year; with a 0.03% APY, you’ll yield $3 for the whole year and end with a whopping $1,003. While on the other hand, with a 1.6% APY you’ll yield $16 for the year and settle for a nicer $1,016. So, just having the awareness of where you should park your emergency fund can net you a 1.3% increase, or a nice $13. You know what they say, you can never go broke making a profit!
If you’re interested in knowing the types of high yield savings accounts that are available, Nerd Wallet provides a monthly updated list showcasing who is offering the most competitive rates. April 2020 addition is here.
***This is not financial advice. Please approach at your own risk.