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Where Should You Put Your Savings?

Oct - 24 - 2017

Before you can decide what to do with your savings, you need to work out what your goals are. Is this money to be set aside as savings - saved for a specific purpose or is it to be invested for the long-term. Money set aside for savings is usually put into a low risk account that earns interest, rather than a high-risk investment option. This will allow the money to grow slowly with little risk. Here we will look at some considerations and options for where you should put your savings.


If you are saving your money, you will want to be able to access it when you need it. This means that it should be liquid. Consider some of these options of where to put your money if you may need to access it immediately:

  • Online bank - Many times, online banks offer higher interest rates than brick-and-mortar banks.
  • No penalty certificate of deposit (CD) - With relatively high returns, these have no penalty if you choose to withdraw your money early.
  • Money Market accounts (MMA) - Banks have more ability to invest in MMA and these commonly offer higher interest rates.

Savings for a Home Down Payment

Saving money towards a down payment requires a unique set of considerations, mostly related to when you will need to access the money.

  • If you are planning to buy your home in three years or less, that is considered a short-term plan and you need to keep your money liquid. For this, you should consider one of the options mentioned above, such as high-yield bank accounts or CDs.
  • If you’re looking at a more mid-term timeframe such as three to five years, you should place your money in a slightly higher risk saving option, such as short-term high-quality, no-load bond funds.
  • Five years and longer is already considered a long-term plan and you will be able to consider a higher risk investment options, such as low-fee index mutual funds or exchange trade funds with diversification.

Retirement Funds

It is important to place a portion of your savings into a retirement fund. It is never to early to start saving for your retirement and the earlier you start, the more you will have when you need it. The plan that you choose for your retirement funds will depend on your current age, your retirement age, how long you’ve been saving for and the type of lifestyle you expect to have at retirement. The younger you are, the more aggressive and high-risk the plan should be. Financial advisors recommend that you subtract your age from 100 and that is the percentage of your portfolio that should be invested in stocks so that if you are 40, 60% should be invested in stocks. However, as people are living longer, some advisors recommend that you should rather subtract your age from 110 or even 120 to get the percentage of your portfolio you should keep in stocks. The older you are, and the more you have already saved, the less risk you should take with your retirement savings.

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