5 things you should never do with your savings

Financial Planners

Saving is essential to financial health, but experts tell MarketWatch Picks that many people are doing it all wrong. To help you spot any mistakes you might be making, we asked financial experts and certified financial planners the top 5 things you should never do with your savings account.

Don’t put your savings in a bank that yields less than about 4%.

“You can earn 3% to 4% when you transfer it to an online high-yield savings account. Don’t sacrifice returns for convenience. You can send money back and forth and take advantage of the higher interest rates offered by online banks.See some of the best savings account rates you can get here.

The same goes for leaving a savings account with the same bank or credit union without checking to see if the interest rates are still competitive. “Interest rates are rising at the fastest pace in 40 years and you don’t want to miss out on better returns. If your account isn’t paying competitive rates, move to a bank that offers better returns. Please,” said Greg McBride, Chief Financial Analyst at Bankrate.

NerdWallet banking specialist Chanelle Bessette says don’t be afraid to combine accounts from different banks. “Some banks may offer great interest rates on your savings, but they may not offer great checking accounts. “It could be a great way to earn higher interest rates while still getting access to other kinds of useful features,” says Bessette.

Don’t overfund or underfund your savings account

Sometimes you have too much, sometimes you don’t have enough. Most people probably fall into the latter category. Her recent GoBankingRates survey of her 1,000 Americans over the age of 18 found that 32.9% have less than her $100 in a savings account. This is a far cry from what most experts advise to be the cost of 3-12 months for an emergency fund, depending on your particular situation and factors such as your marital status and type of job.

Experts say you shouldn’t overload your savings account because there are better ways to earn higher returns, such as investing in the stock market, CDs, and government bonds. The average bear market is down about -30%, although there are some bad years, but Joe Favorito, a certified financial planner at Landmark Wealth Management, said the first year after the decline was The average increase is about 43%, he said. “Of the last 17 years of market negative years, 14 had positive returns the following year, so most bear markets are short-lived,” he says.

“Overfunding is the most common error in savings accounts. can undermine long-term financial goals,” said Melissa Sotudeh, certified financial planner at Halpern Financial.

See some of the best savings account rates you can get here.

Don’t treat your savings account like a retirement account

“I work mostly with women, and they are afraid of losing money, so they have created very large savings accounts. The value of your money will not survive post-retirement inflation,” said Betty Wang, a certified financial planner at BW Financial Planning.

Instead, consider investing your retirement money in income-generating investments such as bonds and dividend stocks. “Investors can consider something like a simple annuity to remove market risk and guarantee income,” says Future Her Planning Certified Financial Her Planner Christina Her. says Guglielmetti of Creating a diversified portfolio is so important in managing risk that most experts recommend investing in a mix of stocks, bonds and mutual funds to increase returns.

Don’t treat your savings account like a checking account

“This can quickly deplete your savings. We pay, we make purchases,” says Blaine Thiederman, Certified Financial Planner for Progress Wealth Management.

See the best savings account rates you can get here.

Not just chasing the best returns

“There are a lot of scams out there that advertise much higher returns than traditional bank accounts. It’s best to stick to reputable, FDIC-insured financial institutions with a long history of good interest rates,” said the accredited financial institution. Facet planner Jordan Gilberty.

Similarly, Andy Mardock, certified financial planner at ViviFi Planning, says avoid being overly tempted by small perks. “In exchange for modest gains, some savings accounts limit the number of transfers and other transactions allowed during the period. ” he says Mr. Murdock.

don’t lend

Your savings should never be restricted to you and anyone else. Mark Humphries, Certified Financial Planner at Sentinel Financial Planning, said: If you lend or give money to others, you will not be able to access the money to cover yourself in an emergency.

Further, Sotudeh said: Some people tend to take 1-3 business days to transfer funds from an external bank, so keep a high-yield savings account in another bank that houses most of your emergency funds and buffer. I prefer Do not use savings for short-term impulsive desires or loans. “

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