That’s the highest it’s been since the bureau began tracking it in 1959. In total, Americans saved $6.15 trillion in one month, when they didn’t even save one trillion last April.
The pandemic’s impact on the economy has served as a grim wake-up call, and people are squirreling away far more money than usual to help prepare for the unexpected.
However, not all saving strategies are created equal, and if you want to maximize your emergency fund, there are few options you should try to avoid. Here’s what not to do with your money during the pandemic.
Don’t keep it in a traditional savings or checking account
While stashing your emergency fund in a savings account may seem like the obvious choice, traditional savings accounts pay practically nothing when it comes to interest. Checking accounts are even worse.
If you’re looking for a better way to help your savings grow over time, you might want to consider a cash-management account instead.
A cash-management account offers the same convenience as a checking account and significantly higher interest than you’d earn with a typical savings account. It’s the best of both worlds.
When choosing an account, you’ll want to look into the terms, interest and any additional perks the company offers. Don't settle for microscopic interest on your savings. Take a look at these accounts that pay many times what you'd get from a standard savings account.
Don’t open a certificate of deposit while rates are low
Under normal circumstances, a certificate of deposit (CD) is a decent place to park your savings if you’re planning to sit on it for a few years. CDs usually offer a higher APY (annual percentage yield) than traditional savings accounts and are insured for up to $250,000.
However, CD rates have taken a nosedive since the pandemic hit, and locking in a CD at a low APY now could cause you to miss out if interest rates go back up before the end of your CD term.
On top of that, if something happens and you need to access your emergency fund right away, you’ll get hit with a substantial fee for withdrawing money from your CD before your term ends.
A better option is to put your money into a high-yield savings account for the time being, then move it over to a CD once rates stabilize and you’re confident you won’t need the money for a while.
Make sure you compare your options before you decide on a high-yield account, though, because rates can vary significantly from bank to bank.
Don’t hoard it all in one place
If you’re saving for the long term, leaving all your money in a savings account — even a high-yield one — likely won’t earn you nearly as much as you’d make by investing a portion of it.
Even though the stock market is still shaky due to the pandemic, investing in dividend-yielding stocks and index funds is one of the best ways to see returns over an extended period of time.
And if the idea of investing during a recession stresses you out, remember that you can always start small. Investing just 5% of your savings with a roboadviser can still earn you solid returns in the long term.
An added perk of using a roboadviser is that your portfolio will be automatically updated based on swings in the market. That means you won’t ever have to worry about whether you’re making the right moves.
You can just sit back, relax and watch your savings grow.