“Maximize Your Savings: Top Tips for Better Returns”

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Optimize Your Savings with These Five Simple Strategies

Saving for the future is always a wise decision, whether you’re building an emergency fund or setting aside money for retirement. Equally important is how you save. Being strategic about your savings can help you achieve better returns and grow your money faster. Here are five simple strategies to optimize your savings.

1. Open a High-Yield Savings Account

Not all savings accounts are created equal. Traditional savings accounts, often offered by major banks, had an average interest rate of just 0.47% as of March 2024. This means you’ll earn $4.70 for every $1,000 you deposit. High-yield savings accounts, typically offered by online banks, provide much better returns. As of April 2024, some rates are up to 5.35%.

You can link a high-yield savings account to your checking account and make transfers whenever you like. If you need to access your savings, your money will be easily accessible. This makes it a good place to keep your emergency fund or cash for other financial goals. Just keep in mind that some financial institutions limit consumers to six electronic transfers and withdrawals per month on savings accounts.

2. Leverage Certificates of Deposit (CDs)

With a CD, you put money into an account for a predetermined amount of time. When the term ends, you’ll get back your initial investment plus interest. APYs are usually higher compared to savings accounts. As of April 2024, some rates are as high as 5.5%.

The main downside is that CDs don’t provide easy access to your money. You can expect an early withdrawal penalty if you take your money out before the CD matures. The penalty amount depends on your CD term and how much you withdraw. However, CDs can be a good holding place for money you don’t plan on using in the immediate future.

3. Automate Your Savings

Getting in the habit of saving can pay off over time. If you put $100 into your emergency fund every month, you’ll have $1,200 after a year—maybe sooner if you come into a cash windfall like a tax refund or work bonus. Automating your savings can make things even easier because you won’t have to manually transfer money into your savings account each month.

Instead, you can set up automatic monthly transfers and forget about it. This approach can also remove the temptation to spend that money while it’s in your checking account. Just be sure to account for these transfers in your monthly budget to prevent overdrawing your checking account.

4. Use Tax-Advantaged Accounts

Some accounts offer tax perks while you save. Below are a few tax-advantaged accounts to consider:

• 401(k)s: Employer-sponsored retirement accounts that allow you to make pretax contributions, reducing your taxable income. You’ll also enjoy tax-deferred growth. Just be aware that 401(k) withdrawals count as taxable income.
• Individual retirement accounts (IRAs): Traditional IRAs allow for tax-deductible contributions, with savings growing on a tax-deferred basis. Roth IRAs are funded with after-tax dollars, allowing for tax-free withdrawals in retirement.
• Health savings accounts (HSAs): If you have a high-deductible health plan, you can make tax-deductible contributions to an HSA. Your money will grow tax-free, and you won’t be taxed on withdrawals used for qualified medical expenses.
• 529 college savings plans: These accounts let you save money for education expenses, including K-12 tuition and college costs. Qualified withdrawals from a 529 plan are tax-free, and some states offer deductions and credits on contributions.

5. Spread Your Savings Across Multiple Accounts

Another way to optimize your savings is to leverage multiple accounts. For example, you might keep some money in a high-yield savings account while investing a lump sum in a CD. You might even have more than one high-yield savings account, each devoted to a different financial goal.

CD laddering is another option. This involves holding multiple CDs with various term lengths, providing liquidity on a rolling basis as each one expires.

The Bottom Line

You have options when it comes to optimizing your savings. Leveraging high-yield savings accounts, CDs, and tax-advantaged accounts can help you get the most out of your money—especially if you have multiple accounts and automate your savings.

Be sure to prioritize your credit health as you build your savings. A strong credit score could unlock good rates and terms on personal loans, mortgages, credit cards, and more. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals.

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