In 2022 and 2023, I was putting a ton of money into my savings account. While I was still investing for retirement, most of the rest of my spare cash went into several different high-yield savings accounts.
That will be changing in 2024, and I’ll be putting a whole lot less into my savings. Here’s why I’m shifting my focus and why I’m happy that I won’t be socking away so much cash into my savings account each month.
This is the simple reason I won’t be saving as much this year
There’s a very good reason I’m planning to put less money into a savings account this year: I don’t have as many short- or medium-term goals in 2024 as I did in 2023.
See, money only belongs in a savings account if you are going to need it within the upcoming year or so. If you are not going to need the funds for a few years or more, the cash is better off elsewhere — like a certificate of deposit (CD) for medium-term goals, or a brokerage account for long-term goals.
If you cannot afford to lose money, you cannot put it into a brokerage account and invest in the stock market, because there’s a risk of your investment values going down and not recovering before you need the cash.
And if you can’t make a commitment to keep your money invested for the length of a CD term (which usually ranges from around three months to five years), then you can’t keep your money in a CD or you could face penalties for early withdrawal.
So, despite the fact that both stocks and CDs can often provide a better return on investment than savings accounts do, savings is the right place for money you’ll need soon. And last year, I had a lot of bills I needed money for on a short-term basis. I was saving for a home renovation project that is underway and also saving to buy an RV, both of which I knew I would be tackling in a short time.
Now that my house is being renovated and my RV is in my driveway, I no longer have very many short-term goals. So, I can take the money I was putting into savings for those goals and use it elsewhere — thus putting less cash into savings.
Don’t be afraid to readjust over time
It’s important to consider just what you want to accomplish each year and to make plans for your money accordingly. In some years, this means you may put a lot of money in the bank and less into your brokerage account.
For example, if you’re saving for a home down payment, you may not want to put your retirement investing into overdrive while you’re doing it. Or, if you’re like me and don’t have any short-term goals, you may want to devote your extra income to investing for your senior years or for other long-range goals.
The important thing is to choose the place to put your funds that aligns with your stage of life — and to make sure you’re making conscious choices about the best accounts that meet your goals in terms of risk as well as accessibility. If you do that, you should be in good shape, even if you put less into savings in 2024.
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