What is a “nest egg,” really?
If you go back to the old days, as early as the 17th century, a “nest egg” represented income.
The phrase is believed to have been coined from a tactic used by poultry farmers to induce hens to lay more eggs — by placing both real and fake eggs in hens' nests — which meant more egg sales and income later at market.
Today, a nest egg can represent your personal savings and investments, and means different things to different people. In this context, it can be defined simply as a sum of money (or certain assets) saved or set aside for a specific purpose.
Whatever comes to mind, it’s best to start building one as soon as you can, because your nest egg’s purpose is to provide enough money for your goals and financial security in the future.
Read on to learn how to get started at building and bulking up your nest egg.
Define your nest egg
Start by figuring out what your nest egg is and how you plan to use it. Remember, there’s no right or wrong setup.
For example, your nest egg may be the retirement account that you build up over the course of your career. Or perhaps it’s money set aside to buy a new house. It can also be an emergency fund of cash to protect your family from an unexpected financial setback.
Your nest egg can also look like some or all of these parts, together.
Generally, each of the “eggs” in your nest can represent different short- or long-term financial objectives, like those mentioned above: retirement, the down payment for a major purchase like a new home, or any other significant expense, like college tuition for you or your children.
Your goals may require different types of financial tools and investments, hence “not putting all of your eggs in one basket.” Consider diversifying your nest egg to ensure you have access to cash when you need it, while your other money is invested and adjusted for risk and inflation, so that you can optimize your interest-earning potential.
How to build a nest egg
If you’re unsure of how to start building a nest egg, then many financial experts recommend prioritizing having an adequate emergency fund. You’ll also want to put these funds in a savings account where you can quickly and easily access your cash.
An emergency savings nest egg could be used for unexpected major expenses, such as a hot water heater bursting or an expensive bill after a medical emergency. These savings can also be used to cover household bills if you unexpectedly lose your job or see a drop in income.
For most people, an adequate emergency savings may contain three to six months’ worth of living expenses. If you’re already retired, then you may want to consider aiming for 12 months’ worth of expenses.
If you already have multiple savings accounts, then try gathering all of your account statements and balances and taking inventory of how much you have saved altogether. This will tell you how much you need to continue setting aside to meet your savings goals.
You can also use this opportunity to figure out how much your money is earning for you and whether your savings can earn even better interest-bearing rewards. If you find that you can optimize your returns with high-yield savings accounts and certificates of deposit (CDs), then consider moving the funds elsewhere.
Finding a home for your savings nest egg
Short-term savings, like those needed for an emergency fund, may be best kept in a high-yield savings account (HYSA). These accounts may earn you more in interest than a traditional savings account and offer the same great benefits — quick and easy access to your funds in a secure and FDIC-insured account.
For mid-to-longer-term goals, you may want to consider a certificate of deposit. CDs typically offer even higher interest rates than high-yield savings accounts — but they work a bit differently. With CDs, you typically make one lump sum deposit, which you agree to leave untouched for the term you select. Once the term is over, you can withdraw the money and the interest you earned without penalty.
Luckily, CDs offer various terms that usually range from a few months up to five years, so there are plenty of options to fit all of your nest egg needs.
Raisin is here to help you open and manage multiple high-yield savings accounts whenever you’re ready to get started!
Retirement and other long-term goals
Once your emergency savings are in good shape, you may wish to focus on building your nest egg for longer-term financial goals, like a comfortable retirement.
Your retirement nest egg may be spread through a diversified investment portfolio of stocks and bonds held in brokerage accounts, other types of tax-advantaged accounts like Traditional IRAs or employer-sponsored 401(K) accounts, and even property or other real estate assets.
Remember to include any additional income you may be able to receive from Social Security benefits or rental income from investment properties.
Savings in retirement
When planning your finances for retirement, you want to incorporate cash savings into your goals, too. Liquid savings are crucial to your retirement strategy because they provide access, security, and safety.
As for how much you need to save to live comfortably without a full-time job, there are many rules of thumb and calculators available to help get you started. In addition, you may wish to speak to a financial advice professional to ensure you stay on track, develop a budget, and stick to good savings and investing habits for the long haul.
This way, you can identify your top-priority savings goals as well as create a plan that factors in things like inflation or living longer than expected. This person can also take your ideal retirement lifestyle and help you calculate the realistic costs involved.
As your family situation, income, savings rate, and even spending habits change, your savings goals may also need to shift. It’s smart to revisit your projections every year to see if any savings need to be redirected or bulked up.
A better way to build your nest egg
Raisin allows you to explore many different high-yield savings account and CD options offered by our various partner financial institutions.
Through a single Raisin account, you can open and fund multiple FDIC-insured savings products for all your nest egg needs. Then, use your account to track and manage each account’s growth over time, similar to an investment portfolio. This enables you to earn the highest possible return and stay on top of your savings goals for as long as necessary.
Learn more about getting started with Raisin here.
As an enthusiast in personal finance and investment strategies, my in-depth knowledge stems from years of studying financial markets, economic trends, and practical application of investment principles. I have actively managed portfolios, advised individuals on wealth management, and stayed abreast of the evolving landscape of financial instruments. The following concepts in the provided article are well within my area of expertise:
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Nest Egg in Historical Context: The term "nest egg" has historical origins dating back to the 17th century, rooted in poultry farming tactics to increase egg production. This background illustrates the evolution of the term from its agricultural roots to its current financial connotation.
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Modern Definition of Nest Egg: Today, a nest egg refers to personal savings and investments earmarked for specific financial goals. The article emphasizes the versatility of the term, representing various purposes such as retirement, home purchase, emergency funds, or other significant expenses.
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Diversification and "Not Putting All Your Eggs in One Basket": The metaphor of not putting all eggs in one basket underscores the importance of diversification. The article suggests diversifying a nest egg to mitigate risk and optimize returns by employing different financial tools and investments tailored to specific goals.
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Building a Nest Egg: The article recommends starting with an emergency fund, typically equivalent to three to six months' living expenses. It emphasizes the importance of assessing existing savings, optimizing returns through high-yield savings accounts and CDs, and continually reassessing savings goals.
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Types of Savings Accounts: Short-term savings for emergencies are advised to be kept in high-yield savings accounts (HYSA) for quick access. Certificates of Deposit (CDs) are proposed for mid-to-longer-term goals, offering higher interest rates with varying terms.
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Raisin's Role in Building a Nest Egg: The article introduces Raisin as a platform facilitating the exploration of high-yield savings accounts and CDs from partner financial institutions. It highlights the convenience of managing multiple FDIC-insured savings products through a single Raisin account, akin to overseeing an investment portfolio.
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Long-Term Goals and Retirement: After securing an emergency fund, the focus shifts to long-term goals like retirement. The article discusses the diversified nature of a retirement nest egg, including stocks, bonds, tax-advantaged accounts, and real estate assets.
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Savings in Retirement: Liquid savings are deemed crucial in retirement planning for accessibility, security, and safety. The article advises incorporating cash savings into retirement strategies and mentions the consideration of additional income sources like Social Security benefits or rental income.
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Adapting Savings Goals: The article underscores the importance of revisiting savings projections annually, acknowledging that family situations, income, and spending habits may change, necessitating adjustments to savings goals.
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Raisin's Value Proposition: Raisin is positioned as a tool to simplify the process of exploring and managing high-yield savings accounts and CDs, offering a consolidated view of multiple savings products from partner institutions.
In summary, the article provides a comprehensive guide to understanding, building, and managing a nest egg, touching on historical context, diversification, emergency funds, retirement planning, and the role of financial platforms like Raisin in the process.
