How Much Money Should I Keep In My Savings Account?

It can be hard to save money. Here are some easy habits to develop that will help ensure that you’re on the right track.

1. Research which high-interest savings account to use

When it comes to where to store your hard-earned savings, not all banks are created equal. It would be time well-spent to research the best investment accounts for you and your financial situation. Though everyone is different, it does make sense to keep the following things in mind throughout your search:

• Is the account FDIC insured? The FDIC, or the Federal Department Insurance Corporation (FDIC), is a federal entity that protects your bank accounts in the case of bank dissolution.
• Of course, you’ll want to be after a savings account with an advantageous interest rate — but what is a good interest rate, anyway? While many of the big banks may offer you an interest rate as low as 0.01%, you shouldn’t settle for that. The average savings account interest rate is around 0.06%, but it’s okay to shop around until you find a rate of 2% or more. This would be considered high interest.
• Would I be better off with using robo-advisors? Robo-advisors, or automated investors, have become more popular during recent times as they allow you to use a computer to invest in stocks based on algorithms, meaning that you can see your investments grow without having to be a stock expert. And let’s be real here, who has time these days to be a stock expert?

2. Develop a fair budget and stick to it

That’s right, we said the “b” word. Developing a budget is not most people’s idea of fun, but there’s a reason why you hear financial gurus and saving enthusiasts alike harp on about it. Budgets can help you stay accountable to your financial goals and ensure that your money isn’t going to waste on frivolous purchases when it could be better spent elsewhere. Sorry expensive oat milk latte, you’re going to take a backseat to drab drip coffee for a while.

The great thing about budgets is that there isn’t really a right way to go about creating one. Your budget is completely unique to you and specific things about your life, such as the amount of your monthly debt payments (Hello student loans!) and your preferred spending on the things in life that make you happy, such as online shopping or takeout meals. You can even use pen and paper if that’s your style.

If you prefer something more electronic, though, budgeting apps like Mint and Goodbudget are very popular.

3. Consider if a savings account is really the best place for your cash

Again, this is another consideration that largely depends on your financial goals and personal circumstance. While a high-interest savings account will be the best option for most people, many will opt for different avenues, such as a CD, a money market account, or even short-term bonds. Much of this really depends on how much you plan to save and what your risk comfort level is.

4. Never lose sight of your personal goals

As we touched on before, it can be easy to give up when it feels like your financial goals are nothing but castles in the sky, and if it feels like everyone else in your bubble seems to be doing better.

The best advice that we can offer here is to breathe. A healthy savings account is not something that is built overnight, and it is normal to go through both gains and setbacks. By setting attainable goals and keeping focused on them, you can help yourself avoid discouragement, which can only derail you while you’re on your financial journey.

Savings money is daunting for many people, but knowing more can help fortify your financial safety net. The next time you ask, “how much money should I keep in my savings account”, remember that it all depends on your lifestyle and circumstances.