Deep Dive
Shownotes Transcript
What's up, guys? I'm George Camel, and today we're talking about saving money. And more specifically, where you should put your savings. And spoiler alert, it's not a porcelain pig with a rubber belly button plug and a dorsal coin hole. By the way, dorsal coin hole, great band name. I don't get it.
Now maybe you want to save up for a big expense, like a car or a vacation. Or maybe you want to save for a down payment on a house. And let's not forget about the most fun thing to save for: emergencies! I mean, who doesn't love putting away money for a busted HVAC? When it comes to where to put your savings, there's lots of options out there, and some are better than others.
and choosing one can be a little bit confusing. You don't want to end up putting your money somewhere with a lot of red tape, fine print, and strings attached. So in this video, I'll share the worst places to save your money, and to avoid being a huge bummer, I'll also share the best place to save your money. A magical place that will let you earn some interest and make sure you have access to your money for whatever life might throw at you. Like, I don't know, a squirrel in your HVAC.
Okay, that's actually pretty dope. And luckily he didn't fall in, so crisis averted. So let's start with the five worst places to put your savings so you can be sure to avoid them like Meghan Markle avoids her in-laws. Now we've ranked these from least risky to most risky, but they're all mediocre at best. And why would you choose something mediocre on purpose? Looking at you Keurig lovers, why do you love pain and suffering and watching burnt water blast through old coffee grounds at 98 miles per hour? Like that.
Sometimes it takes a few times. And speaking of risk, go ahead and click those like, share, and subscribe buttons so you don't risk missing one of our videos. And so we don't risk the wrath of the algorithm. She can be a salty old wench. You'll do my bidding or taste my wrath. Okay, the first place you don't want to put your savings is...
Under the mattress, because that would hurt your back and your emergency fund should help you sleep at night, not keep you awake. But really, it's less about the actual location of the money and more about the fact that it's physical cash and not earning you any interest. That money is losing value every day thanks to inflation, which means it's not living up to its full potential. Just like Ted Lasso's season three, we had high hopes and you can do better. Just, I don't know, believe. All you fellas need to do is believe it.
So you don't want to have too much cash tucked under the mattress, locked in a safe, or hidden on the top shelf with your baseball cards. Not to mention, keeping a ton of cash on hand is also risky. I mean, you don't want these guys sniffing around your house. And to be fair, it's good to have some cash on hand in case you need it, but not 25 grand in case the banks fail. Now, if I were you, I wouldn't have more than a thousand bucks in cash stashed away in my house.
I talked to one caller on the Ramsey Show who had $120,000 buried in tin cans in his backyard. That's a little much. A little much! A little much! Yes, a little much. And I know a duffel bag full of cash looks cool in the movies, but remember, the goal is not to have enough cash to fund a military coup in Fredonia. I just want you to be able to tip the pizza guy.
All right, enough Home Alone clips. Let's move on. The second place you don't want to put your savings is a traditional savings account. Now, you might be thinking, wait, how does that make sense? A savings account is meant for savings. It's right there in the name. And you're right. The banks want you to use it for savings. In fact, they'd love that because they get to use your money with very little cost to them. You see, a traditional savings account pays you very, very little interest. We're talking about a quarter of a percent on average right now.
That means for every $1,000 you save, you earn a whopping $2.50 per year. Oh, really?
That sucks. The only good reason to use a traditional savings account is to have some money connected to your checking account to use as a buffer or a baby emergency fund. That way, you can quickly move some money to checking if needed. But you definitely don't want to keep your full emergency fund in there. Yes, it will earn you a tiny bit more interest than a tin can, but it's just not the best option. All right, next up, the third place you don't want to put your savings, CDs.
Nope, not that kind of CD. Those are compact discs. I'm talking about certificates of deposit. These are financial products offered by banks and credit unions where you deposit your money for a specific amount of time and in return, you earn a fixed interest rate until that time is up. This can range anywhere from three months up to five years. And CDs generally have a higher interest rate than traditional savings accounts or money market accounts. But wait, there's more red tape. You see, most CDs have limited liquidity.
which is really fun to say, but has a not so fun meaning. Limited liquidity basically means you can't take the money out without paying a penalty. And since the purpose of an emergency fund is to, you know, pay for emergencies, you want that cash to be so liquid you could drink it with a straw. So avoid locking away your savings in CDs. The only CDs I ever recommend buying are gems like these, baby.
That's right. Vocal aerobics, anyone? Although you may have trouble finding a device that will play this ancient technology beloved by millennials. At this point, your best bet is probably an '07 Camry. All right, the fourth place you don't want to stash your cash is permanent life insurance.
These policies cover the insured person for their entire life and include a cash value savings portion. Basically, it tries to be two things at once, insurance and savings, and it does both very poorly. Like your cousin on Instagram, whose bio says that they're an entrepreneur slash DJ. Just say unemployed, bro. Okay, it's easier and it's honest.
- Okay, I am on a much needed respite whilst in between jobs. - Now the main types you see out there are whole life, universal life, indexed universal life, and variable life. And permanent life insurance is peddled by these insurance agents who are posing as financial advisors. And they'll tell you that it's a great way to build your savings
and even build wealth. But permanent life insurance locks you in for years with high costs and high commissions. And if you stop paying your premium, your cash value and insurance could vanish. And with most policies, your family often won't even get the cash value when you die. It goes to the insurance company. I did a whole video on my channel breaking this down, so be sure to check that out. The bottom line is permanent life sucks as a savings account and just in general.
Stay away. All right, the fifth and worst place to save your money: stocks. Or if you're a grown man, you just call them stocks. Be a grown up. Stocks are the riskiest place of all to put your savings, other than maybe on top of your car or in a trash can or in an envelope that says "destroy immediately." But you get the idea. And I know it's tempting to want to take all that money you've saved up and try to turn it into more money by investing in the stock market. But please don't do this.
Stocks and even index funds or mutual funds are way too risky for your savings account. Because when you need that money for an emergency or your savings goal, there's a chance you will have lost money. So if your car breaks down and Larry down at the shop says you have to pay a buttload of money to fix it, you've got to now sell off your investments potentially at a loss to cover it. And you don't have to be an AP Spanish to understand that is no bueno. Remember,
The purpose of your savings is to protect your money, not potentially lose it. And your emergency fund is not meant to make you rich. It's insurance, not an investment. It's a buffer to help you avoid going back into debt for emergencies. So now that we know where not to put your savings, where should you put it? Well, I'll tell you where to put it. The best place is a high yield savings account.
Now, you may have seen this labeled as an HYSA. This is a type of savings account offered by banks and credit unions with a much higher interest rate than a traditional savings account. While traditional accounts average about a quarter of a percent interest rate, high-yield savings accounts are currently offering rates of at least 3% or 4%. That's 12 to 16 times more. Wow, that's a lot of money. And the best part is, these accounts have little to no strings attached, just like NSYNC's third studio album. ♪
Now you might be wondering, why do you own NSYNC's third studio album? The real question is, why do I also own the import from the UK? And the answer is none of your business, okay? It's a good album. Now when it comes to these accounts, you want to look for one with no minimum initial deposit, no minimum balance to maintain, and no penalties for withdrawing your money. Then you can say bye-bye-bye to annoying fees and restrictions. Now the only thing to look out for with these types of accounts are transfer times and withdrawal limits.
Whoa. For example, some accounts only allow you to take out money six times a month. Now, this is generally no biggie because you're not dipping into the honeypot that often. And if you're having emergencies more than six times a month, you've got other issues. Looking at you, bad luck, Brian.
Quick side note, make sure that your HYSA is with a bank that is FDIC insured or if it's a credit union, NCUA insured. That means your money is protected up to $250,000 per depositor, per bank and per account ownership category. Now you might be wondering, how are these interest rates so high with these high yield savings accounts? Well, most of them are available through online banks. And because online banks have less overhead than brick and mortar banks, they can pass on those sweet savings to you.
An opening in HYSA is like opening any other bank account, and you can do it right from your smartphone or while you're on a hike to Machu Picchu. Why would you do that? I don't know. You should be enjoying the view. Now, if you're looking for a savings account with the benefits of a checking account, the second best option for savings is a money market account. This keeps your money safe and sound, has a relatively higher interest rate than normal savings accounts, and gives you more access to the money with checks and debit cards.
And just like a high-yield savings account, you want to look for one that's FDIC-insured with no fees, no minimum deposit, and no minimum balance. Now, you may not get as much interest, but the benefits of checks and debit cards may outweigh it for you. So the bottom line here, my top pick for your short-term savings, your sinking funds, and your emergency fund is a high-yield savings account.
And if you want to know the one that I use, I'll drop a link in the description below. Because I know you're going to ask me in the comments, so let me just spare you the keystrokes. Now, legally, this is not financial advice. Please do your own homework when it comes to these accounts. Make the decision that's right for you and your financial situation.
And if you're looking for an app to help you reach your savings goals and sinking funds, the app I use and highly recommend is called EveryDollar. It's a free download in the App Store, and I'll drop a link below to that as well. As always, make sure to like, subscribe, and share this video with someone who has a high-yield savings account shaped whole in their financial heart, especially your friend who has money tied up in CDs, and also with your uncle who still listens to CDs. Give it up, Uncle Greg. The entire Eagles discography is on Spotify. All right, that's it for today. Thank you guys for watching. I'll see you next time.
All right, guys. That's a wrap. Good work, good work. Who wants to have a little dorsal coinhole listening party as we clean up? Anyone? Any takers? Anyone got an 07 Camry laying around?