The 3 Best Places to Put Your Savings in 2023

Make sure that money goes to work for you.

Saving more money is a popular New Year's resolution, but it's not as simple as just working a little more or finding expenses to cut from your budget. Once you've brought the extra money in, you have to decide where to put it so it can do you the most good.

While the best place to keep your savings will likely vary from person to person, here are three suggestions for where to keep your spare cash this year.

1. Emergency fund

An emergency fund should be everyone's top financial priority if they don't have one already. And even if you do, it's a good idea to look it over and make sure it's still adequate after all the inflation we've experienced over the last year.

At a minimum, your emergency fund should contain at least three months of living expenses. Six months is even better and some people prefer to save up to a year's worth of expenses. This might be worth it if you believe it would take you a long time to find work again if you lost your job.

It's up to you to decide which expenses to include when calculating your emergency fund. You could focus on just the essentials like housing, utilities, and groceries. Or you could include extras too, like streaming services. But note that if you don't include all your monthly expenses, you might be forced to tighten your belt if an injury or job loss leaves you unable to work. You can use an emergency fund calculator to figure out your target to save.

2. High-yield savings account

A high-yield savings account is a great home for your emergency fund and also for any short- to medium-term financial goals you're saving for. Money for a down payment on a house or car, for example, or savings for a wedding or vacation are best kept in a high-yield savings account.

These accounts have no risk of loss as long as you keep your financial information private and don't exceed the FDIC insurance limits. This makes them a more desirable home for short-term savings than investment accounts where there's a chance that you could lose money.

High-yield savings accounts also offer interest. The rates aren't as high as what you might earn through investing, but they're considerably better than what you'd find with brick-and-mortar bank accounts. Many traditional savings accounts only offer about 0.01% annual percentage yield (APY), which might pay you a few cents per year at best. But the top high-yield savings accounts are currently offering over 3.50% APY. That could net you tens or even hundreds of dollars per year in interest, depending on how much money you keep in the account.

3. A retirement account

A retirement account is an excellent home for your savings if you don't plan to spend the money anytime soon. You can invest the money to help it grow more quickly, and this will reduce how much you personally need to set aside for retirement.

There is a chance that you could lose money, but over the long term, the stock market has historically had strong returns. Short-term losses generally aren't a huge concern when investing for retirement because most workers still have decades left to recover from them before they begin tapping their savings.

Retirement accounts also offer tax advantages you won't find with a taxable brokerage account or savings account. Tax-deferred retirement accounts, like 401(k)s and traditional IRAs, give you a tax break on your contributions in the year you make them, while Roth accounts allow for tax-free withdrawals in retirement.

But before you put any money here, you should understand the rules that apply to any retirement account you choose, including annual contribution limits, eligibility requirements, and income restrictions. This will help you avoid costly penalties at tax time.

You can also split your money between several of the options discussed above. Think about what works best for you and then check in with yourself every month or so to see how your savings strategy is working out. Switch it up if need be until you find something you can stick with over the long term.