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Where should I keep my savings?
If we had to choose our top five most asked questions, this would be right up there with “where do I start?” and “wtf is investing!?”.
Fortunately, Tori is here to break down the different kinds of savings accounts –– from traditional savings accounts you get at your bank to HYSAs, CDs, investing accounts, and more!
This quick hitter will help you set financial goals and achieve them faster while feeling confident about your choice of accounts. Tori also goes over some motivational tools and techniques so you’ll have fun while you fund that vacation to Italy.
What different types of savings accounts exist
When you should invest over using a savings account
How to determine which account is the best for your savings goals
Tori Dunlap (00:17):
Hello, hello, financial feminists. Welcome back. So excited as always to see your lovely faces, even though I can’t see you, but I am going to assume that you’re doing something fun. Maybe you’re on a summer road trip. Maybe you are taking the kids to camp. Maybe you’re on your hot girl walk, your hashtag stock girl summer walk. I’m I’m trying to make stock girl summer a thing, guys. I don’t know if it actually is a thing. Maybe we’ve gone viral and it’s blown up and it’s now this national phenomenon, because I’m recording this in July. Let’s hope, let’s manifest that it is.
Tori Dunlap (00:53):
First of all, you all were very invested in subway man. If you don’t remember subway man, no, it is not Subway sandwich man. Although I did discover recently that Subway is the most popular fast food chain in terms of restaurant locations. Did y’all know that? It’s not McDonald’s, it’s not Starbucks, Subway. Subway has the most locations. Anyway, this is New York subway man, who I had a meet cute with, who we exchanged numbers. And you all are like, “What is happening? You’re destined to be together.” And I am sorry to disappoint you and say, we are not destined to be together. We went on a date actually that same day, the date was fine. He was nice. It was not a love connection. So, I’m sorry to burst your bubble. Maybe the only reason you were listening to this podcast was to figure out if subway man and I are getting married. This is like the Community episode where I’m marrying Subway. But I’m disappointed to say that it was not a love connection, but I am assured that money and I are very happy together.
Tori Dunlap (02:05):
So, don’t you worry about me. I’m going to be just fine, but I wanted to give you an update. Y’all were adding me and in my DMS being like, “I need more info.” So subway man, if you are listening, I wish you the best. And I hope you have plenty of more meet cutes on the C train.
Tori Dunlap (02:24):
In other news, if you have not heard, if you are not following us at Her First $100K, if for whatever reason, you skipped the episode where we talked about it, my book is available for pre-order. This is, as I’ve said before and I’ll say again, the hardest thing professionally I’ve ever done. Writing a book is so difficult. It’s like a fucking four year process and I’m so proud of this book. It’ll take you step-by-step through everything you need to know about money. This is like your one-stop shop for learning how to spend mindfully, learning how to create a budget that doesn’t make you want to die, saving money, paying off debt, investing, earning a good wage at a job you like. And most importantly, how to use money in your general life as a tool to build the world that we want to see.
Tori Dunlap (03:15):
It’s called Financial Feminist: Overcome The Patriarchy’s Bullshit To Master Your Money And Build A Life You Love. You can pre-order it now. Pre-order is so important for us. It’s a great way for people, booksellers, to know that the book is popular, so that they stock more books, so that they advertise more for it. So, if you haven’t gotten your copy, it is not only available as a physical book. You can also get an ebook copy, and/or an audiobook copy read by yours truly. So, I so appreciate the support. You’ll hear more about the book in the coming months, but all of the links are in the show notes.
Tori Dunlap (03:49):
Today, we are talking about one of the most popular questions that we get all the time. We talk a lot at Her First $100K about savings accounts, about the importance of course, saving money. But a lot of the questions we get are like, “Okay, I know money and saving money is important, but where do I put that money? Where does it go?” And if you followed us at all for like two seconds, you’ve probably heard us
say high yield savings account, the words high yield savings account. And maybe you’re wondering what are they? Are they too good to be true? What is the difference between high yield savings account? Is it investing? We’re going to answer all of your questions today and to start us off, we have a lovely voicemail question about high yield savings accounts from a community member.
Speaker 2 (04:31):
Hi, Tori. I had a quick question about saving for the smaller things in my life. I’m invested in the market for my long-term goals, but when it comes to things like vacations or purchasing expensive furniture pieces, things like that, I’m a little confused on where to put that money. I wasn’t sure if it belonged in the market alongside some of my longer term goals, or if it belonged somewhere like my high yield savings account. When I put things in the market, it seems kind of untouchable. And so, I wasn’t sure if that was the proper place for these kind of smaller purchases in comparison to my larger ones. Thanks.
Tori Dunlap (05:12):
Okay. Let’s start with the very, very basics. What is an HYSA? What is a high yield savings account? In simple terms, a high yield savings account is simply a normal everyday savings account, but with a higher yield. Higher yield, meaning a higher interest rate. When you think about putting money into a savings account, we want it to do something for us because the money’s just sitting there. And you’re like, “Why would I put the money in a bank versus under my mattress or in my backyard?” One, much more secure in a bank, but two and probably the most compelling reason, is that you’re going to earn interest on your money. You’re going to earn compound interest.
Tori Dunlap (05:57):
What does compound interest mean? Compound interest is simply when your interest earns interest. So, if you put $1,000 in a savings account at let’s say, 1% interest, well suddenly you’re not just earning 1% interest on $1,000, you’re now earning 1% on $1,010 and earning 1% interest 1% interest on that, and on that, and on that. It compounds. So, when you think about an everyday savings account, the average national savings account interest rate will literally earn you pennies. It’s like 0.03% or 0.05%. Any neighborhood bank, or even national bank, that’s brick and mortar meaning they have physical locations, is probably offering you somewhere around that. Now again, much better than sticking it under your mattress. Not only much more secure, but you’re earning something.
Tori Dunlap (06:54):
However, that’s pennies. Even if you have, let’s say $50,000, $75,000, $100,000 in a bank account with 0.03% interest. That’s not even 1%. That is a very small amount of money. It’s not even half a percent, it’s not 0.5, it’s 0.05. So, if the money’s just going to sit in a savings account, which is what we want it to do, it may as well be working harder for us. It may as well be earning us as much money as we can.
Tori Dunlap (07:28):
So, when we think about a high yield savings account, it’s a regular savings account that’s offering us more in interest. Now, as of this recording in summer 2022, we’re seeing interest rates anywhere from half a percent to about one and a half, or even 2%. So again, the great thing about high yield savings account is it’s just like a normal savings account, except it’s earning you more in interest. Now you’re thinking this sounds maybe too good to be true. Like what is the catch here? There really isn’t a catch truly there isn’t it’s like the one personal finance thing that isn’t too good to be true. However, when you’re thinking about high yield savings accounts, they are different from investing accounts, investing accounts like a Roth IRA, a 401k, a general brokerage account.
Tori Dunlap (08:18):
We talk about all of these in our previous episodes, aren’t investing. These are accounts where you’re putting money into the stock market. These are for longer term goals like retirement children’s college savings, that kind of thing. A high yield savings account is for short term goals. You should not be putting your retirement money in a high yield savings account. Just like you should not be putting your money for a vacation next year into an investing account. So yes, high yield savings accounts can earn you more in interest. However, it still pales in comparison to investing a high yield savings count is not a supplement or a investing alternative. It is rather a better alternative for your short term goals. Now, what are those short term goals? The most popular one is an emergency fund. We talk about it on episode five, the financial game plan episode, the where do I start episode, please, if you have not listened to that, go back, but your number one financial priority is an emergency fund.
Tori Dunlap (09:24):
I’m going to say it again. Your number one priority. The first goal on your list before you pay off debt, even before you start saving for retirement should be an emergency fund. It should be three to six months of living expenses in that high yield savings account. Your emergency fund’s job is to sit there and be liquid, liquid meaning it’s basically cash. It’s a bank account you can access tomorrow if you need that money. And if its only job is to sit there, which is again what we want, it may as well be working harder for us. It may as well be earning us 15, 18, 20 times more than a regular savings account.
Tori Dunlap (10:10):
Other short-term goals that are perfect for high yield savings accounts, vacation funds like I said earlier. If you want to go on vacation next year or maybe two years, if you’re saving for a wedding, if you’re saving for a down payment on a house in the next couple years. Literally anything that you want to save for that’s like a couple years or under out, should be in a high yield savings account.
Tori Dunlap (10:35):
I have clients who have like emergency funds, general emergency funds, and then they have pet emergency funds for like if their dog gets sick, and then they have another emergency fund for their house, or for unexpected sunken costs. And then they also have a high yield savings account for their Croatian vacation next year, because that’s the other thing. You can have as many high yield savings accounts as you want. And I actually recommend that because if you have all of your money for various different goals under one savings account, that gets very confusing. You’re like, “I don’t remember which money is which money.” It also leads to potential guilt when you do go to use that money for something. If you don’t have your money properly labeled, not only do you not know what it’s there for, but you also end up like if you’re in an emergency situation, you go, “Oh shit, I feel bad about using this money.” Versus if this money is specifically labeled emergency fund or fuck off fund, or when shit hits the fan fund, you’re like, “Okay, that’s what it’s there for. I’m going to use it.” That’s the shit I think a lot of people don’t talk about because we don’t realize it until after it’s happened.
Tori Dunlap (11:47):
But plenty of my clients have gotten into that situation where they maybe didn’t listen to me and put all of their money into one savings account. And then when it’s time, when they have lost their job, unfortunately, or they have a flat tire, then they feel so much guilt about using that money. That’s what the money’s there for. It is there specifically for that particular goal, especially if you’ve labeled it as such, it helps psychologically for you to not only divvy up, “Okay, this money is for this purpose. This money is for this purpose,” to delegate it in your mind. It’s also for you to assuage that guilt. The feeling of like, “Oh shit, I have to use this money.” It’s like, “Yeah, that’s what the money’s there for.” That’s what it’s there for. That’s what you did. You saved for that particular thing.
Tori Dunlap (12:35):
Now, when it comes to high yield savings accounts, here are a couple of the pitfalls that I see, not about the accounts themselves, but about the way people use accounts or about how they decide what high yield savings account they’re going to go with. Most high yield savings counts, and really they should be are, FDIC insured. A lot of people think, “Okay, I’m going to get a high yield savings account.” That’s the catch, it’s like, “Is my money safe?” Yes, your money is safe, typically up to $250,000.
Tori Dunlap (13:01):
Now, I will say, if you have more than $250,000 in a high yield savings count, especially for emergencies, I don’t know what you’re planning for. That’s a crazy emergency, but again, maybe save some of that money into investing. Again, a high yield savings account is not an investing replacement. It is rather for your short-term goals and $250,000, either your monthly expenses are nuts, which you go, if you can afford that, or you are keeping too much money in a high yield savings account. So, up to $250,000, it is safe. It is secured. It is guaranteed.
Tori Dunlap (13:32):
The other thing about high yield savings accounts is people get obsessed with researching them. They spend so much time and effort being like, “What is the absolute best high yield savings account?” They’re all the same. I’m going to be honest with you. There are certain benefits to different accounts. There’s certain interest rates. However, the interest rate fluctuation, like 0.1%, is not going to matter as much as good customer service. I would rather you spend your time finding a high yield savings account that you like, at a company that you like, and just ride the interest wave than try to go and constantly switch high yield savings accounts because, “Ooh, this place has a slightly better interest rate.” Now again, 0.03% to one and a half percent is a pretty big jump. 1.5% to like 1.3%, that’s not a lot.
Tori Dunlap (14:31):
You should be spending no more than 10 minutes researching a high yield savings account. I’m about to call y’all out. I want you to hear this. I want you to hear me very clearly. You should not spend more than 10 minutes researching a high yield savings account and lucky for you, we have our recommendation linked in our show notes. Look at that. You don’t even have to spend the 10 minutes researching. We’ve already done the research for you, boom, perfect. Your trusted financial expert with our trusted recommendation.
Tori Dunlap (15:01):
However, if you’re going to do your research, please no more than 10 minutes. Use the hours of time you have been spending researching high yield savings accounts into actually learning how to invest. Ramit Sethi, my friend, fellow financial expert, he talks both in my book and on an upcoming episode, about $3 versus $30,000 decisions and a high yield savings account is so beneficial. I mean, we’re doing an entire episode on them. However, you should not be spending the hours of time researching high yield savings account. Find one you like, find one that has good customer service, good ratings, again, maybe it’s our rec
ommendation, and use the rest of the time actually doing something that’s going to be a big picture, $30,000 decision, like researching your market rate in order to go ask for a raise, or setting up an automatic transfer from your checking account to your savings account every month, or starting to invest. That’s where your time financially should be going. Your financial self-care time should go towards those bigger impact decisions.
Tori Dunlap (16:02):
One of the other things to be mindful of with high yield savings counts, a lot of them will tempt you with a higher interest rate, but it has a catch. So, some of these places will be like, “Oh, we’ll give you 3%, or 4%, or even 5%.” And you’re like, “Holy shit, that’s incredible.” And then they’re like, “Oh, but it’s only up to the first $1,000, or it’s only for the first six months of you holding the account.”
Tori Dunlap (16:30):
Now, if you honestly do know, “Okay, I’m only going to have $1,000 in there.” Cool, that’s great. However, I think anybody’s three month emergency fund is over $1,000, right? So, that’s probably not the best bet for you. In addition, you end up playing weird catch up mind games where you’re like, “Okay, I remember that this one has this restriction and that stresses me out.” It’s just better to find a savings account that’s going to give you a flat interest rate, no matter how much money you put in there, or how long you keep the account open.
Tori Dunlap (17:02):
Now, a high yield savings account is different than a CD. A CD, it’s a certificate of deposit. A certificate of deposit is like an even more souped up savings account. But in exchange for giving you typically a higher interest rate, they are locking you in. So, for example, if you had a two year CD, or a 24 month CD, let’s say it’s at 2%, 2% interest. What they’re doing is they’re saying, “Hey, you can put your money in here and you can get 2%. However, typically you can’t access that money for 24 months.” So, they’re incentivizing you with a higher interest rate in exchange for you locking in your money.
Tori Dunlap (17:48):
Now, if you know, you don’t need that money for a long time, cool, that might be a great option for you. However, that’s not super flexible. And again, your emergency fund needs to be super flexible, should not go in a CD. Typically, if you do have to take the money out of a CD early, you only lose the interest. You don’t lose any of your original money. You’re just out the interest you would’ve earned. However, right now, most CDs are not offering you much more benefits than a high yield savings account. We’re not seeing these crazy good CD rates, for the most part. There are some exceptions, again, a CD maybe only makes sense for you if you know your goals are further out, you can also, if you’re getting closer to retirement, maybe we’ll do a whole episode on this if somebody’s interested, but a CD ladder, you can google that, if you’re getting closer to retirement and you’re taking some money out of the stock market, you can put it in a CD that might make more sense for you.
Tori Dunlap (18:47):
However, for the average person listening, a CD, definitely not for your high yield savings account. A CD, definitely not for your emergency fund. And it might not just make sense in general because a high yield savings count is going to offer you more flexibility.
Tori Dunlap (19:01):
A couple extra tips for optimizing your HYSA your high yield savings count. Please set up automatic transfers. You’ve heard me say this so many times. If there’s one goddamn thing you take away from this podcast, you need to automate everything you can in your financial life. So, set up an automatic transfer from your checking account to your high yield savings account. If you can, through your payroll platform at work. Set up, “Okay, this percent or this amount of every single paycheck is going to immediately go in my high yield savings account.” Not only is it happening without you even having to think about it, but it also is doing the hard thing for you. Too many people wait till the end of the month to start saving. If you put in the automatic transfer, it’s happening without you having to think about, it’s happening without you having to do anything. And it’s just accumulating over time. It’s doing the hard thing first. It’s paying yourself first, as opposed to the end of the month, when you’re like, “I don’t have any money. I spent all my money. I don’t know what to save.” We got you covered, it’s happening without you having to think about it.
Tori Dunlap (20:02):
Another pointer for high yield savings accounts is you can set up a tracking or a goal sheet to keep you motivated. You can literally, like you’re in kindergarten, put together a coloring sheet, where you get to color in a star for every let’s say, $200 you put in your high yield savings account. Or you can say, “I know I need $2,000 to go to Japan next year. Okay, $2,000 divided by 12, 12 is the months of the year. That’s how much a time I have to save. This is how much I know I need to save every single month.” And then you get to color it. Maybe it’s like a Japanese flag, that would be fun. But set up some sort of goal tracking sheet. When you make your goals visual, you are 33% more likely to hit them. You’re also going to be motivated. It’s like, “Oh, I get to color that thing in every time I do it. It’s the dopamine. It gives us a little reward, which is very important for us to see progress and to keep going.
Tori Dunlap (20:57):
I will also say, again, I like a whole section about this in Financial Feminist, in the book, when you’re thinking about saving money, progressing towards any goal, whether it’s financial or not, progress over perfection. There’s going to be months or even multiple months, or even maybe years, where you can’t save a lot, or maybe can’t save at all. It’s important though, that you just keep going. If you get off the bandwagon for a little bit, it’s okay. It’s okay. Offer yourself grace and get back on it. I’m going through that right now with my fitness journey.
Tori Dunlap (21:31):
Before pandemic, I was at a barre class two, three, sometimes four times a week. I could have a band around my legs and eight pound weights on both of my hips and do five minutes of hip raises. Yeah, it was hard, but I could do it. I can barely get through five pounds now, with no band. I’ll admit, it’s been a little frustrating. I’m like, “Okay, I’m not where I used to be. This is really frustrating.” However, I won’t be where I used to be if I don’t try and if I don’t build it up. I went through a really hard two years. Pandemic was shitty, shitty for everybody. I’m getting back in it. I’m not in the shape I once was, that’s okay. I’m getting back in it and I’m offering myself grace and understanding and knowing that, “Okay, I’m going to show up and it’s going to be a little harder than it used to be. And we’re going to slowly build up to where I was.” The same thing can happen with your money.
Tori Dunlap (22:29):
So, put together some dopamine triggering activities. Make a coloring sheet, use a spreadsheet to keep track, if that’s your thing. And again, automate everything that you can. Now, if you don’t already have a high yield savings account, you’re in need of a new one, you’re trying to figure out where your emergency fund should go. We have a recommendation linked in our bio. We’ve done the research for you, easy peasy. Again, if you don’t have a high yield savings account, especially for your short-term goals, you need one for your emergency fund. Absolutely, that’s the one that you absolutely need a high yield savings account for. And if you don’t have a high yield savings account, you are losing money. You are losing an opportunity to grow your money at a quicker pace. Because with compound interest, it helps you.
Tori Dunlap (23:15):
If your goal is to, let’s say, save three months of living expenses, let’s say that’s $10,000. Well, cool. Your interest rate actually helps you do that. It compounds, it’s less work for you. So, you may as well be earning more money. Link in our show notes for the one we recommend. We also have more resources on our site about high yield savings accounts, about what they can be used for. I think we’ve done a pretty good job in this episode about summing all of that up. But for whatever reason, if you want to read it instead, show notes, we’ll link it.
Tori Dunlap (23:47):
As always financial feminists, please don’t just passively listen to these episodes and be like, “Ah, cool. I’ll get around to it.” And then you forget. You can literally sit down and have this done in no time at all. I would rather you actually use this podcast and use the valuable information in it to make changes in your life. And if you’ve fallen off the bandwagon, I got you. You’re okay. Give yourself some grace and hop back on and it’s okay. It’s okay if you’re a little slower. It’s okay if it’s not as much money. It’s okay if you’ve slipped off. The important thing is yep, you get back on.
Tori Dunlap (24:22):
Open your high yield savings account, transfer your money out of your regular savings account that’s earning you nothing, into a high yield savings account. And again, high yield savings counts, different ones for different goals.
Tori Dunlap (24:34):
Okay team, as always, we are so thankful for your support of the show. So much more information about money in general, about saving money and paying off debt and investing, not only with this podcast, so hit subscribe if you haven’t already, but over on our Instagram at Her First $100K. And if you haven’t taken the free quiz, our free money personality quiz is also linked in our show notes. It is the perfect place to get started. We give you very specific step-by-step recommendations based on where you’re at in your financial life.
Tori Dunlap (25:07):
Again, if you’re that person who’s frantically Googled, “How to money?” At 2:00 in the morning, this quiz is for you. We take our literally thousands of hours of free resources and we’ve compiled them so you don’t have to frantically google anymore. Thank you as always, financial feminists. I love you and I appreciate you. I hope you’re having an incredible summer. Thanks for being here and we’ll see you back here next week.
Tori Dunlap (25:34):
Thank you for listening to Financial Feminist, a Her First $100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, marketing and administration by Karina Patel, Olivia Coning, Cherise Wade, Alina Helzer, Paulina Isaac, Sophia Cohen, Valerie Oresko, Jack Coning and Ana Alexandria. Research by Ariel Johnson
, audio engineering by Austin Fields, promotional graphics by Mary Stratton, photography by Sarah Wolfe and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First $100K team and community for supporting the show. For more information about Financial Feminist, Her First $100K, our guests and episode show notes, visit financialfeministpodcast.com.