Cash savings accounts play an important role in optimizing your financial resources. They are financial accounts that do not actively invest in the stock market and can be found at your local credit union or bank and are generally used for everyday finances and short-term goals. In this article, we'll explore what cash savings accounts are and how to best use them in your financial plan.  

Checking Account

Your checking account is the most basic form of cash savings. It provides immediate access to your funds through debit cards, checks, and online transfers. Although it doesn't usually generate substantial interest, it's essential for managing your day-to-day expenses and handling bills efficiently.

Short-Term Savings Vehicles

Certificates of Deposit (CDs) and traditional savings accounts fall under this category. While CDs can generally offer higher interest rates than regular savings accounts, they require you to lock in your money for a predetermined period, which makes them less liquid. These are ideal for saving for specific short-term goals, such as a vacation or a down payment on a car. Click here to see Rivermark Community Credit Union’s current CD offerings and rates.

High-Yield Savings Account

Another alternative cash savings account is known as a high-yield savings account. It provides the best of both worlds: liquidity and interest. Unlike checking accounts, these accounts yield a modest return on your money while allowing easy access in case of emergencies. They are your financial cushion during unexpected events like medical bills or car repairs. One option to consider is Betterment’s Cash Reserve Account, which has a current variable annual percentage yield (APY) of 4.75%, no minimum balance or fees or cap on interest earned.

I’m intrigued, how should I use these accounts?

The general rule of thumb is that if you anticipate needing your funds within the next three years, cash savings accounts are the wisest choice. Their accessibility ensures you can easily access your money without worrying about market fluctuations.

One of the primary purposes of cash savings accounts is to establish and maintain an emergency fund. Financial experts recommend setting aside three to six months' worth of living expenses in a high-yield savings account. This safety net can help cover unexpected financial needs, such as job loss or medical emergencies, without resorting to credit cards or loans.

When to Save vs. When to Invest

Understanding when to save and when to invest is key for building long-term wealth. We can help clients determine the right combination of savings and investment assets.

In conclusion, cash savings accounts are the bedrock of your financial well-being. They provide immediate access to your money, ensuring you can handle both expected expenses and unexpected emergencies. By adhering to the general rule of thumb and maintaining a robust emergency fund, you'll have the peace of mind knowing that your financial foundation is strong. And when it comes to the delicate balance between saving and investing, our team is here to help you make informed decisions that will secure your financial future. Visit access.humaninvesting.com to schedule a phone call. 

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