Where Do You Keep Your Money? (2024)

This post is by our regular contributor, Erin.

In the personal finance world, it goes without saying we love to talk about money. How to earn more of it, keep more of it, and make it work for us.

Rarely do we discuss where we keep our money.

You might be inclined to say “my wallet” or “my bank account,” and those are pretty standard answers. However, your money isn’t earning much interest in those accounts.

You can get more bang for your buck elsewhere, depending on the timeline of your financial goals.

Let’s go over where you can keep your money (hint: not under your mattress!) and get the most out of it.

Bank Accounts

Sadly, keeping money in a regular old savings account doesn’t do much for you these days. Even high-yield savings accounts are paltry. However, something is better than nothing, right? And you want some liquidity in case you have an emergency.

I recommend keeping your money for short-term savings goals and your emergency fund in a savings account – one with a higher APY that doesn’t require a huge minimum balance and also doesn’t have any fees. You shouldn’t have to pay a bank to hold your money for you!

For your expenses, have a checking account and keep it topped off so you don’t have to worry about overdraft fees. It’s that simple.

Online banks have some of the best rates around, and they’re typically free of maintenance fees.

Do you have your own business? Don’t forget to open business checking and savings accounts. It makes your life much easier come tax time.

Fixed Income Products

Have a couple of medium-term to long-term goals you need to save for? Consider CDs or money market accounts, as each offers higher interest rates when compared to a regular savings account.

You’re required to keep your money in a CD for a set amount of time, so make sure you’re not going to need it before then, or you’ll face a penalty when withdrawing the funds.

Money market accounts may not be worth the higher minimum balance they usually require. They have slightly better interest rates than regular savings accounts. In addition, they function as a hybrid checking/savings account, so you can write a limited amount of checks a month from it.

ETFs, bonds, and mutual funds can also be included here, but they’re much riskier than CDs or Money Market accounts. You have to be able to manage that risk, and I wouldn’t recommend it if you’re a beginner, or don’t have a financial planner to help you.

Retirement Savings Accounts

Your 401(k) is probably the first thing that comes to mind here (or a 403(b) if you work in the nonprofit sector). If you have a good employer match, you should definitely take advantage of it and contribute as much as you possibly can.

There is one drawback, though – you need to look at your investment options. Not all 401(k) plans are created equal. If there’s a history of sub-par returns, or if it has high fees, it’s worth looking into other alternatives. At the very least, speak with your plan manager about the limited investment options available.

Next, you’ll want to focus on funding an IRA – whether it’s a Roth or Traditional. Your money grows tax-free in a Roth account, and tax-deferred in a Traditional account. You’ll face a hefty 10% penalty if you withdraw funds before you’re 59 1/2, unless you’re covered under an exception.

IRAs are great for young adults, especially for those who are freelancers and don’t have access to a 401(k). If you’re self-employed, look into a Solo 401(k), SEP IRA, or Simple IRA.

If you’ve managed to max out your 401(k) and IRA – congratulations! You’ll probably want to talk to an advisor about your next moves. Investing in the market requires realistic expectations and you should be knowledgeable about what you’re investing in. Generally, ETFs, index funds, and mutual funds are “safe” routes to go if you don’t want to invest in individual stocks.

Afraid of investing? Don’t be! Your money can’t outpace inflation when it’s kept out of the market. The only way to capitalize on growth is to invest it somehow.

A Few Other Ideas

You can also choose to keep your money in real estate, if you’re interested in becoming a landlord and earning rental income.

Otherwise, an HSA is a good idea for those who have one. You can use it as a medical emergency fund, and you can invest excess funds while lowering your taxable income.

There are a ton of options for investing as described in DC’s post 8 ways to start investing. An individual investment account isn’t a bad idea, especially if you have your eye on specific company stocks you want to purchase.

Just keep your money away from your mattress or dresser drawers!
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This is intended to be a basic primer for those getting started and wondering where they should save. I know a few people who don’t even have a checking account, so I hope this helps!

Of course, everyone’s circ*mstances are different. If you’ve found investing your emergency fund works better for you, or that you enjoy CDs, or that it’s more advantageous to invest everywhere but your 401(k), go for it!

Where do you keep your money? Do you have a savings and checking account? Do you have a retirement account? Know anyone that doesn’t have either?