You have a lot of options for where to keep your money, and some are better than others.
If money comes into your checking account and stays there, you’re probably not making the most of your money. Eventually, you’ll find it hard to organize and meet your money goals. Financial planner Marci Bair previously told Business Insider that she advises keeping no more than two months worth of expenses in your checking account.
The “right” place to keep your money is different for everyone. It isn’t with a specific bank or in a specific account. Rather, it’s the place (or places) that make it easy to manage and help you work toward your goals. And if your money isn’t easy manageable and doesn’t work toward your goals? Then it’s in the wrong place.
Here are few signs you could put your money somewhere better:
1. You don’t have enough cash on hand for emergencies
If the current financial climate has taught us anything, it’s to expect the unexpected. It’s never been more important to have an emergency fund in a liquid, easily accessible place like a high-yield savings account or money market account. If your emergency fund isn’t full and in a separate account, your money isn’t in the right place.
“You want to have proper liquidity,” says Monica Sipes, a financial planner and Senior Wealth Adviser at Exencial Wealth Advisors. Being too heavily invested could be a problem right now, so she suggests striking a balance between the cash you need to feel comfortable and long-term investments if possible. “Position your household to function no matter what happens,” she says.
If you don’t have an adequate emergency savings account, she says now is the time to bulk yours up, or start one. Typically, experts recommend keeping more like three to six months’ worth of living expenses in a liquid account, but in recent months those estimates have increased. “Make sure that your two-income household has 12 months of spending in the bank today, even if you had six months of spending 18 months ago,” she told Business Insider.
2. You don’t have goals you’re working towards
If you don’t have money goals you’re working towards, there’s a good chance you’re keeping your money in the wrong place. Your goals should help to inform where you’re keeping your money. If you want to buy a house, for example, your savings should be kept in very different places according to your time frame.
Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial and a financial planner, previously told Business Insider how your goal’s timeline should influence your account choice. “When you look into the four or five-year time frame … you might want to consider a certificate of deposit where you’d be locking up the money for a defined period,” she told Business Insider. But, “If someone’s goal is just 18 to 24 months away, consider saving in something that’s really liquid and really low risk,” she says. Then, it’s certain that you’ll have the money on hand when you need it.
Even though both scenarios involve the same goal, the time frame is different, changing where you can save most effectively. If you don’t know what you plan to do with your money and when, there’s a good chance that it’s not in the right place.
3. You have trouble checking your account regularly
If you don’t know how to check your account, have been locked out of your bank’s website for months, or find your bank’s online interface hard to use, it’s time to consider a change.
It’s hard to stay on top of your money goals if you can’t easily log in and see your account balances. If this is a problem, there are plenty of easy-to-use savings accounts and checking account options out there. If you mainly do your banking online, you might want to consider an online bank for constant access, lower fees, and higher interest rates.
Online convenience is an important factor these days. If you’re not able to access your account regularly, it’s a sign that you should start looking for a new account.
4. Your money isn’t growing on its own
The reason people invest, for retirement or otherwise, is to keep their money growing over the long term. Despite the market’s swings, historically long-term investments have always gained value. You can invest through a retirement-specific account like an IRA or 401(k), through an index fund at a brokerage, or even through an investing app, if you prefer.
The key is that you don’t invest the money you need to live on today, or that you’ll need for your goals soon. Experts emphasize that for most people, investing is a long-term game, and it’s the right place to keep money you won’t need for decades.
Not every type of growth is as dramatic as investing. Take a look at savings: If your savings account is earning .01% or .05% interest, it isn’t working as hard as it should be. The average savings account earns about .09% interest, so you’ll certainly never want to earn less than that. Look for an account that lets your money grow while you save.
A high-yield savings account could be the right move. These savings accounts earn many times more interest on your money than typical savings accounts, helping you grow your balance and reach goals quicker. These are the ideal accounts for an emergency fund or saving for a down payment on a home.
