Layering Your Accounts
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Though the circumstances are extreme, one silver lining has been that families have increased their savings rate during this difficult time.
At the beginning of 2020, it was estimated that Americans were saving around 7.9%. When the pandemic hit, understandably the savings rate shot up to over 32%!1
With businesses, schools, and communities having to stay at home, the financial uncertainty had many stashing away as much money as they could.
Now that many states are opening up a bit more, families are looking to get back to their pre-pandemic goals and plans. For some, that may include saving for a house down payment, family trip, or their kid’s college fund.
Today I want to share how you can organize and maximize your savings so your money is working for you.
When You Have Several Goals You’re Saving Up For
Like many, my husband and I have several goals that we’re working towards.
When we were first married, we focused on building that emergency fund, but we’ve expanded to include goals like car fund, vacations, our brokerage account, and retirement.
Some of these are more short term while others are long. Based on our goals, we have different accounts for them.
The Art of Layering Your Accounts
You want your money to work for you, so one of the best things you can do is make sure it’s saved in the right type of accounts.
With short term goals like an emergency fund, your key concern is having a safe and accessible account.
Using a savings account, especially with Coastal can give you the added bonus of earning higher than normal dividend.
If you’re saving with a defined date in mind or want to boost the interest you’re earning then a Certificate may work for you. You basically lock away for your money for a set period and get a higher interest rate for it.
On the other hand, a money market account is best if you want to have access to your money at anytime. However, keep in mind that you typically need to maintain a larger minimum balance to get the best rates.
Health savings accounts (HSAs) can be a fantastic way to save for your health care expenses. You’ll need to have a high deductible health plan to qualify.
If your family is fairly healthy and generally goes to the doctor for an annual well visit, a high deductible plan can save you a lot of money. Talk it over and run the numbers to make the best decision for you.
You can then redirect some or all of that money saved into your HSA.2 With your HSA you can contribute up to $3,600 for an individual or $7,200 for families.
Are you planning on saving some money for your kid’s college costs? You should look at opening and contributing to a 529 plan or Coverdell Education Savings Accounts (ESA).
Finally if you’re saving for retirement, you may want to look at what options are available through your employer like a 401(k)/403(b)/ or Thrift Savings Plan (TSP). In some cases, you may get a match on your contributions!
From there you can weigh your options with investing in an IRA. You can contribute up to $6,000 a year, which given time, will go a long way to hitting your retirement goals.
As you can see there are plenty of different options and accounts for your different goals. If you’d like to get guidance on which ones would be best for your specific needs, please reach out to Coastal’s wealth management team, available through CFS*.
They can work with you to craft a plan that fits your goals, budget, and timeline!
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Setting Up Your Savings System
Now that we had an idea of what we were saving for , the next step was coming up with a system that allows you to hit your goals without you having to stress over every penny.
We found that automating our transfer and contributions saved us a ton of time and hassle. On Fridays, I just log in to review for a few minutes and then I’m done.
We then get together about once a month on our money dates to go over our goals for the year and make adjustments as needed.
Hopefully you can see that it’s possible to save more when you have a system in place and your money in the best accounts for your goals.