Life Use Accounts: Savings

Aug 20, 2020 9:15:06 AM / by InvestorKeep

savings

 

As a reminder, life use accounts are precisely that, accounts and/or assets we use for daily living. Your checking account is not a way to save money or invest. It is simply a container to hold your money as it flows in and out. Savings accounts are also considered life use accounts. They are not typically viewed as long term (more than 12 month) investment type accounts.

Savings accounts play a pivotal roll in managing your wealth. They should be used specifically to achieve near-term financial goals, protect yourself for a rainy day, and for upcoming big purchase(s) you're planning to make in the coming 12 months.

The best practice is to maintain between 3 to 6 months worth of monthly expenses in your savings account. This protects you and your family against unforeseen circumstances where you may be without income for a few months. First and foremost, make sure you have enough money in your savings account to achieve this goal.

If you are saving to make a planned purchase within the next 12 months (i.e. vacation, purchasing a new car, buying a hot tub, etc), then use your savings account to put that money aside. Unlike investment accounts, a savings account gives you immediate access to your money but it will typically grow faster than if you just leave it in a checking account.

It's important to monitor your savings account to ensure you don't have more money than needed for 'rainy days' or planned one-time purchases you will be making within the next 12 months.

Any money in a savings account with a balance in excess of those needed to achieve the above goals could be costing you a missed opportunity to grow your long-term wealth using investment accounts that generally give you higher returns on your money.

Linking your savings account(s) to InvestorKeep ensures you can be alerted to opportunities to talk with your Financial Professional when you have money available to invest for the long-term.

 

InvestorKeep

Written by InvestorKeep

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