Where to Keep Your Savings: Factors to Help You Decide

As I have mentioned on my blog before, young adults struggle with handling their money because of inexperience. We often don’t want to admit it because we want to prove our independence, but there are so many times in my life that I feel like I could do better if I had someone to bounce ideas off of. (Since starting this blog and being more open about my financial struggles and successes, I have had more opportunities to talk to people close to me about money and it has helped tremendously. In other words, it never hurts to ask.)

Young adults struggle not only with earning money, but managing their money once they have it. Many will spend it thoughtlessly on iPhones or other technology, but there are some that have a priority to save. For those who are saving money, you might be asking yourself what the best place to keep your money is.

Factors of Deciding Where to Keep Your Money

Many financial experts, when asked this question, will often tell you a high-interest savings account and call it a day. It’s the easiest place to get a decent interest rate while also being guaranteed. But, I think we all know that life is a little more complicated than that. In fact, there are several things to consider when deciding where to keep your money.

Security

The first and foremost is whether the location is secure or guaranteed. I’m not talking about a $20 safe that you can slide under your bed or put in your bedroom closet. That is not secure, no matter what anyone tells you. I’m talking about federal guarantees that your money is safe, no matter what happens. The only way to guarantee your money will be there in the future is to put it in a savings or checking account. But, there are varying degrees of security. Some investments or other funds are “pretty secure”. Typically, conservative investments are less volatile and have more certainty.

The level of security desired will also depend on how likely it is that you will NEED this money. Will this money (or part of it) be considered an emergency fund and only touched in rare instances? If so, you may be able to take a few risks in where you put your money, but don’t jeopardize your safety net too much. While it’s important to keep your money active for you, you don’t want to get greedy. If this money is in addition to your emergency fund, why not put it in a more volatile investment to increase your potential returns.

Interest Rates or Return

Another factor to consider is the rate of return. If you are putting you money in a savings account, it is as simple as determining the interest rate that the bank makes public. It’s important to recognize that there are frequent changes in savings rates. A savings account that I own, for example, just jumped from .8% to over .9%. These are the types of changes that I can enjoy. Different banks offer different rates, so make sure to do your research. If you aren’t putting your money in a savings account, you’ll need to do a little more research on what type of return to expect. You can look at historical averages and expert projections to gauge whether it is worth putting your money there.

Location

Your location will also affect what type of accounts or funds you should be considering. While most of my readers are in the U.S., there are also regular readers from Canada and the U.K. For my readers in the U.K. a great option would be a cash isa, but it is going to depend on where you are located. It’s important to figure out which accounts and funds are available to you. There are ways to invest in foreign markets, but there are certain regulations and fees associated.

While I would love to create a standard rule or regulation for where to put your money, I know that everyone’s situation is different. It is up to you to weigh the different values for where to put your money and try to find a balance. Keep some money on reserve and make sure at least some of your money is in more conservative accounts/fund, but it is up to you to determine the amounts depending on your life situation.

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