Let’s talk savings accounts.

How much interest does your current savings account pay? No idea? Go check, I’ll wait.

Let me guess, somewhere around 0.01-0.09%? Yikes! With inflation hovering around 2% each year that means if you keep your money in a savings account you are guaranteed to lose money. This fact seems to escape most people who instead assume that keeping your money in a form of cash such as checking/savings accounts, is the safest bet.

Now, everyone should have a readily accessible cash supply in a FDIC insured bank account. However, the amount and specific bank is what can vary.

Saving your money without a specific purpose is not the best strategy. First of all it’s ummotivting and second of all, it’s just unorganized. Set SPECIFIC savings goals for your life. We recommend the bucket strategy in which you have a separate savings account (a bucket) for each goal and contribute to each regularly, but in order of importance.

Some specific goals (buckets) that should be housed in a savings account are your emergency fund, your vacation fund, your wedding fund, or something like a diamond ring fund. Basically it’s for anything you may need to pay for within the next year or two, but NOT for your day-to-day expenses.

Everyone’s #1 should be an emergency fund. Once that goal is met, you can continue on to other goals.

At minimum you should have 3-6 months worth of living expenses covered. As your family grows and your obligations increase, it’s best to grow that cushion to potentially a year’s worth of emergency savings.

This may sound like a lot, but life is completely unpredictable. A job loss, health emergency, home repair, or surprise tax bill are just a few of the things that could go wrong. If you don’t have cash to pay, then you could end up making poor decisions, like putting these expenses on a credit card or even skipping a mortgage payment.

So to avoid financial disaster, work your hardest to build up a cash supply of 3-6 months worth of living expenses and do not touch it unless an emergency occurs. If you need to dip in, then do so, and work to replenish the pot.

Ok finally, back to the topic of interest rates and why it is so important. Your money needs to earn money, aka interest. This should always be what you are looking out for. In recent months, interest rates have gone up which means banks are *kinda sorta* paying you again, yay! Keep in mind though, this also means the interest rates on mortgages, car loans, and credit cards have gone up as well.

When it comes to where to house these savings accounts mentioned above, we strongly reccomend a High Yield Savings Account at an online bank. Brick and mortar banks are pretty sub-par and you can easily make do without one in your life. It’s the 21st century, people.

Below are She’s Good With Money’s top recommendations for an online savings account. (The list is in no particular order, but for full disclosure, I use Amex High Yield Savings.)

Option 1.

Synchronoy Bank High Yield Savings offering 2.20% APY. NerdWallet rated this the best savings account, and they usually know what they are talking about. There is no minimum balance to open a savings account. The bank is entirely online which means their user experience should be pretty good in order to warrant their high reviews.

Option 2.

Ally Bank High Yield Savings offering 2.20% APY. For the past few years Ally has been the talk of the (personal finance) town. It is an online-only bank and their APY is definitely at the higher end of the spectrum. They have great reviews and are certainly worth a look for your banking needs. No minimum balance.

Option 3.

American Express Personal Savings, High Yield Savings Account offering 2.10%. For those of you who use American Express for charge cards or credit cards, this may be a convenient and familiar option for you. You can easily toggle between the HYS account page and your credit card account page when you log in from either end. No minimum balance.

Option 4.

Marcus by Goldman Sachs High Yield Savings  offering 2.25% APY. A familiar name in big time banking is now offering to work with average person via its Marcus platform. The APY is impressive and with everything done online, it’s a great option.

The only step after opening your high-yield savings account is to link it to an external bank account. From there you should transfer any current cash savings to your new high yield savings account and set up monthly automatic transfers to reach your specific savings goals, whatever they may be!

A final point to make is that you should look out for a form called “1099-INT” from your high yield savings account come tax time (Jan-Apr 15). This tax document will show all of the interest earned in your account and you will need to report it on your tax return (assuming you will earn greater than $10 in interest).

So make a change and earn some more money! What takes a matter of minutes to open a new online savings account will earn you money that you were missing out on before. It may sound like small figures but 0.06% compared to 2.20% totally adds up and will help you reach your goals faster.

Happy Saving!