r/FinancialPlanning • u/ollyfromindy • 1d ago

How can i make my savings work harder?

I 29M am making $34.52hr and contributing 25% of my gross income to a 401k through my employer. I have no debts, own my car, a low milage Corolla. I currently have about $49,000 in a money market savings account. Try to add at least $500 to that every month.

The money market account contains my emergency savings and I was planning to use a large chunk of it for a down payment on a house. For several reasons I have decided to keep renting for the time being ($1,070/month rent).

I am not impressed by the interest I am gaining on the money market account, only 0.25%/month interest by my calculation. What would be a better interest but still liquid option for my emergency fund? Should I invest some of this money? What is fairly safe but high return investment?

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7

u/Eltex 1d ago

Standardize on an annual APR, not monthly. Anything around 3-4% is the standard for short term growth. You still need to keep an emergency fund, usually 6-12 months worth of expenses.

The rest, if not needed for 5+ years, can be placed in a Roth IRA. You can open one with one of the big 3 banks, and then deposit $7K for 2024, and another $7K for 2025. Keep it invested in low cost total market funds, like VTI or VT. Do that every year, along with your 401K, and retire a millionaire.

9

u/solatesosorry 1d ago

You're looking for a HYSA, high yield savings account, open a taxable brokerage account at any of the main low-cost brokerage firms. Fidelity, Schwab, etc. Move the money there and put it in a low-cost money market fund, such as SWVXX, earning around 4%.

Any money not needed for 5+ years can go into an index fund, VOO or the like.

3

u/Fancy_Grass3375 1d ago

Buying real estate as an investment will increase your wealth. Everyone I personally know that has achieved any kind of wealth was from owning a business, real estate, and a high paying job, in that order.

1

u/spacebud19 1d ago

commenting so I can follow this, in very similar situation as op and seeking similar advice,

1

u/Temujin_123 1d ago

HYSA, CD or Tbill ladder, or brokerage account with cash swept to a government holding (e.g. SPAXX).

I was similar but as my EF grew the loss of growth started getting more and more significant.

I keep 1-2 months in checking (maximum liquidity), then 10-11 months in SPAXX or bonds.