The 3 Smartest Places to Stash Your Money Now

Start 2021 off strong by making these savings goals your top priority.

Saving money is key to reaching your goals and maintaining financial security, but knowing where to stash your savings is also an important skill to master. The best place for your money depends in part on your situation, but there are a few places everyone should at least consider putting some of their cash, if they haven't already. Let's take a look at three of the most common.

1. Emergency fund

Last year drove home the importance of having an emergency fund to help cover unexpected expenses, like an insurance claim or a home repair. It can also help you and your family stay afloat following a job loss.

If you don't have an emergency fund already, building one should be your top priority. Aim to save at least three months of living expenses, though six months is even better if you can afford it. Set aside as much as you can spare every month until you've hit your target. And don't forget to replenish your fund if you withdraw money from it so you're prepared for the next emergency.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.90% Rate info 3.90% annual percentage yield as of December 14, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.90% Rate info 3.90% annual percentage yield as of December 14, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

Keep your emergency fund in a savings account, preferably a high-yield savings account that earns an APY above the national average. While it may be tempting to invest these funds, it's generally not a good idea to do so because you don't know when you'll need to use that money. If it's all invested, you may be forced to sell at a loss to get the funds you need in a pinch.

2. Retirement accounts

Retirement may not seem like a priority, especially if you're relatively young, but thinking that way could easily cost you $1 million to $2 million. Starting as young as you can makes saving this large sum a little easier because your investments will have more time to grow before you need to withdraw them.

A 401(k) is a good place to begin if your company offers one, especially if it matches some of your contributions. You should be able to defer a dollar amount or percentage from each paycheck so you don't have to remember to make contributions manually. Individuals under 50 can contribute up to $19,500 in 2021, while those 50 and older may contribute up to $26,000.

If you don't have access to a 401(k), consider opening an IRA. You may only contribute up to $6,000 to one of these in 2021, or $7,000 if you're 50 or older, but you can open one with any broker and invest in almost anything.

3. High-yield savings accounts

While high-yield savings account rates aren't what they were a year ago and likely aren't going to return to those high levels anytime soon, one of these accounts is still a good place to put extra money you plan to use within the next five years or so. That's because you'll earn a higher APY than you'd get with a savings account at a brick-and-mortar bank.

You're only allowed six free savings account withdrawals per month under federal law, but that's still pretty lenient compared to a certificate of deposit (CD), another common tool for savers. CDs require you to lock up your money for a certain amount of time, which could be anywhere from a couple of months to several years. In exchange, you get a locked-in interest rate for the full term.

Given the uncertainty around how the economy will rebound in 2021 as COVID-19 vaccines become more readily available, it makes more sense to choose a high-yield savings account that lets you withdraw funds at any time. Locking yourself into a CD at today's low rates could possibly prevent you from securing a higher rate in a few months or a year from now. With a high-yield savings account, you're free to move your money between banks and capitalize on better rates elsewhere anytime you want.

It's ultimately up to you to decide where to put your money and how much to place in each type of account, but if you're trying to improve your financial security, stick to these suggestions in the order they're listed above.