{"id":13285,"date":"2022-09-22T19:07:37","date_gmt":"2022-09-22T19:07:37","guid":{"rendered":"https:\/\/jboitnott.com\/?p=13285"},"modified":"2022-11-01T16:39:42","modified_gmt":"2022-11-01T16:39:42","slug":"free-your-money-keeping-your-money-in-the-best-places","status":"publish","type":"post","link":"https:\/\/jboitnott.com\/zh\/free-your-money-keeping-your-money-in-the-best-places\/","title":{"rendered":"Free Your Money: Keeping Your Money In The Best Places"},"content":{"rendered":"

Have you recently come into some extra cash? It doesn\u2019t matter whether you\u2019ve inherited money, earned a bonus, or sold your house for a profit. Having this spare money gives you a wonderful opportunity to build up your savings or solidify your retirement plan<\/a>. But, when it comes to choosing the right place to stash your money isn\u2019t always simple.<\/p>\n

You should consider your return on investment, as well as the liquidity and the time you have before you have to access the funds. If you are deciding where to save your money<\/a>, you should also consider security and investment costs.<\/p>\n

Free Your Money\u00a0Today<\/h1>\n

To help guide you in with this decision, here are 8 strategies for keeping your money in the best place possible.<\/p>\n

1. The ability to withdraw\u00a0money.<\/h2>\n

My first tip on finding the place to keep your hard-earned money is accessibility. By that, I mean you should consider how often you\u2019ll need to withdraw money, as well as the convenience. For example, with a savings account, this isn\u2019t a problem at all. After all, you can hit up an ATM, write echecks<\/a>, or make an electronic transfer for upcoming purchases, like rent or groceries.<\/p>\n

The opposite is true with certificates of deposit and retirement<\/a> accounts like 401(k)s, IRAs, or annuities. Since these are intended to be long-term investments, they aren\u2019t as liquid. If you do make an early withdrawal, you may incur a penalty.<\/p>\n

How much will these penalties set you back? That depends. If you withdraw your money early from a 401(k)<\/a>, you may be subject to a 10% tax penalty, plus any federal and state income taxes<\/a> that are due. Also, if you take money out of your 401(k), annuity, or any other qualified retirement plan before the age of 59 \u00bd, the IRS imposes a 10% tax penalty.<\/p>\n

With CDs, the size of the penalty is determined by a number of factors. These include the bank, CD term, and yield. Generally, most banks charge an early withdrawal penalty based on the rate of interest paid on CDs.<\/p>\n

In short, your choice of account depends on whether you are likely to need liquid cash in the near future.<\/p>\n

2. Rate of interest.<\/h2>\n

Account types that offer higher rates of interest or investment income are not all created equal. Rates and investment dollars can also differ among banks or brokerages.<\/p>\n

You can earn more money by keeping your cash in certain types of accounts, but in exchange higher rates often come with fewer access options. Interest may also be earned only if you meet the minimum balance requirements in certain accounts.<\/p>\n

Typical checking accounts offer you APYs of less than 0.01 percent. While the highest paying high-yield savings account offers an annual percentage yield of 0.65 percent. In this way, a high-yield savings account is an appealing option <\/a>for those looking to grow their savings while also being able to quickly access funds when needed.<\/p>\n

You could also look more into money market accounts. They\u2019re a cross between savings and checking accounts. The rates are usually higher than a savings account with more options for cash access, such as checks and debit cards. However, you may only withdraw six times a month as a free service.<\/p>\n

Typically, with long-term investments, you\u2019ll receive a higher interest rate. The catch? You can\u2019t access your money as easily. Also, despite the ups and downs of the market, long-term investments<\/a> have usually outpaced inflation.<\/p>\n

3. Support.<\/h2>\n

Statista<\/a> reports that U.S. online digital banking users exceeded 161 million users in 2019. That represents an impressive 20% increase from 2014. However, does that mean people are turning away from traditional banks and credit unions? Not exactly. Some folks still prefer face-to-face interactions with banking representatives.<\/p>\n

Moreover, despite their convenience, online banks are usually more cost-effective than their on-site counterparts because of their lower overhead. As a result, you may not have the same level of in-person support. This is important since most online and traditional banks and credit unions provide full-service accounts, including checking and savings accounts. And, various other products are also available through online banking, including CDs, money market accounts, and loans.<\/p>\n

In short, it\u2019s possible for some people to manage their finances more or less independently online or through an app. Others, however, may prefer having that in-person assistance at their bank branch.<\/p>\n

4. The distance between you and your\u00a0goal.<\/h2>\n

Consider how much money you need to save and how long it will take you to achieve your financial goal. Investing instead of saving should be your focus if it is expected to last more than several years. It\u2019s similar to free money<\/a>, as you won\u2019t have to work daily for it.<\/p>\n

\u201cAnything past four or five years is no longer savings,\u201d Todd Christensen, education manager for the nonprofit debt relief service MoneyFit, told Nerdwallet<\/a>. \u201cYou should see anything longer than four or five years instead as an opportunity to invest and build your net worth<\/a>.\u201d<\/p>\n

Short-term financial goals.<\/h3>\n

Examples of short-term savings goals would be saving for a vacation, a small emergency fund, or home improvements within a year. As such, you may want to consider high-yield savings accounts, money market accounts (MMAs), or cash management accounts (CMAs).<\/p>\n

Medium-term financial goals.<\/h3>\n

A major wedding, a down payment on a house, or an emergency fund <\/a>that covers three to six months of expenses might take a year or more to build. You should keep your money separate and in a safe account that earns a little interest. Most of these products aren\u2019t designed to build wealth, because their interest rates don\u2019t exceed inflation.<\/p>\n

Suggestions would be the aforementioned high-yield savings account, MMAs, and CMAs. CDs are another popular option well.<\/p>\n

Long-term financial goals.<\/h3>\n

If you want to save<\/a> for or invest in something that will take a decade (or more), such as retirement or a college fund for your child, here are some ideas.<\/p>\n

Investment accounts like a 401(k) or IRA to fund your retirement.<\/a> If you saving for your child\u2019s education, then you could invest in a 529 plan.<\/p>\n

5. Added fees and penalties.<\/h2>\n

With some bank accounts, you will have to pay a penalty if you withdraw the cash before a certain date. In turn, this could reduce your interest earnings.<\/p>\n

Fees are charged by some online, traditional banks, and credit unions, but not all of them. In bank fees alone, the average individual can spend more than $300 per year. Similarly, a basic bank account may have a monthly fee of $5<\/a>, whereas a rewards bank account may have a monthly fee of $12.<\/p>\n

The following are some of the reasons you may incur fees and penalties on checking and savings accounts:<\/p>\n