How much money should you save? Here’s how to decide

to select The right high-yield savings account for you One of the best ways to jumpstart your savings. A competitive interest rate — especially at today’s high rates of around 4% or more — can help you save more and reach your savings goals faster.

Apple’s new savings accountFor example, earning a solid 4.15% APY, while you can get 4.75% APY from CIT Bank, 4.25% APY from Lending Club and 4.00% APY from Barclays, Just to name a few.

But before that you can cut everything Benefit from a great high-yield savings accountIt is important to set a savings goal that is right for you.

“Having a specific savings goal in mind also makes saving easier than saving for it,” Kim Hall, CFP, director of financial planning and co-owner of Clarity Wealth Development, said recently. CBS News.

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How much should your savings be?

The exact amount of savings varies for everyone. You can use a few different factors to determine the amount that’s right for you, both for emergency savings and other savings goals.

emergency fund

If you don’t already have one emergency fundThis should be your first savings goal.

Experts recommend Keep at least three to six months worth in a high-yield savings account, which you can designate as yours Emergency savings In case of an unexpected expense or period of financial hardship.

There are a few ways you can adjust that general advice for yourself. To start, figure out your monthly expenses, cutting out any unnecessary expenses if you need to. You should include monthly grocery expenses and rent or mortgage payments, for example, but may not include money you spend on online shopping or ordering food delivery.

Then, think about your own risk tolerance. For example, if you’re a renter and you believe your income is relatively stable, you might be comfortable saving just three months’ worth of expenses. On the other hand, if you own your home and must make repairs, you have a family that depends on your income, or you work in a field with a lot of volatility — you might consider saving up to six months’ worth of expenses or more. warning

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Other savings goals

Beyond your emergency savings, think about other savings goals you may have.

For example, maybe you’re planning an upcoming international trip, or you’re saving for your wedding next year. This could be an additional contribution to a high-yield savings account, so you can easily access funds when you’re ready to spend.

Just remember, this type of savings account is best for short-term savings goals (and your emergency fund). For long term goals eg retirementYou’ll want to invest your money so that it grows over decades.

How to save more

Once you have set your savings goals and Opened your high-yield accountIn fact, the saving process begins.

If you don’t already have a large sum to start with, your savings goal can seem a lot more daunting. Just remember, even if you start small, you can build up a solid savings balance over time.

Look at your budget and income to determine how much you can contribute each month. To really make saving a priority, you might want to see what expenses you can eliminate and increase your contribution.

Then, set up Automatic transfer regularly. This will help you add to your savings balance without having to worry about withdrawing money from your bank account. Finally, let’s go to your high-yield savings account interest rate Work for you. Over time, your account will earn interest and help increase your savings balance.

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Bottom line

The amount of money you have in savings can vary greatly from person to person. In general, it’s smart to start with your emergency fund and work toward saving a few months’ worth of expenses. Then, think about other big items you want to save over the next few years.

Over time, your contributions and interest earnings will add up, and you can feel more prepared to cover whatever comes your way in the future.

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