I want to write this post on my best tips on how to make your money work for you. So many people are uneducated when it comes to their finances, and I see it everyday on social media. For example, I saw a video the other day on Daily Mail, and it blew my mind. A guy at a bar tried to impress a girl (who was SO not interested) by leaving his bank account open in front of her.
He had $90,000 in his checking account.
I am appalled by this “man” for so many reasons. The main reason his actions shocked me? By how ignorant and fiscally unaware this guy was to keep that much money in a checking account! You should NEVER keep a large sum of cash in your checking account because it earns virtually NO interest. The money could be growing like crazy over time in a high-yield savings account or investment account, but he is just letting that money sit there. That cash will not be able to keep up with inflation over time, and he is missing out on free money in the process.
Most people think that having a lot of money in their checking account is the goal – IT’S NOT. You don’t want to leave your hard-earned money just sitting in an account making .02% interest.
Put your money to use!
My biggest tip that I give to people is to DIVERSIFY YOUR MONEY. Don’t have all of your money in one place (just like the “don’t put all your eggs in one basket” idiom says).
Save for emergencies in an emergency savings account, invest as much as you can, and only keep as much cash in your checking account that you think you’ll need for short-term expenses.
Let’s Recap:
- Do not keep a large sum of cash in your checking account unless you’re about to USE that cash for something very soon!
- Make your money work FOR you
How To Make Your Money Work For You:
Invest Your Money:
You can make a killing just by investing in some stocks. I have an entire post about investing for beginners here
Put Your Money In A High-Yield Savings Account:
High yield savings accounts are just savings accounts that have a higher return on your money. Basically, you just leave your money in there and it will grow faster than a regular savings account.
Some great ones to look at are with banks like Ally, Citibank, and Alliant Credit Union.
Put A Large Sum Of Money In A CD:
A CD, or Certificate of Deposit, is a savings account that you can’t touch until it reaches maturity. For example, a 6-month CD is a CD where you can’t take the money out for at least 6 months.
Most banks and credit unions offer CDs, and they earn a higher interest rate of return than a high-yield savings account. You can’t contribute to a CD over time (you can’t put $100 in a CD every month), so it’s perfect for setting aside a lump sum of cash that you don’t plan on using for a while.
So if Grandma gives you $1,000 for your birthday and you want to save this money for 3 years, you can put it in a 3-year CD. The money will grow fast, and you won’t have to worry about this money for 3 years.
XO,
Layton