Harness Money

There are many different ways to save money.

It is always a good idea to keep an emergency fund worth 1 years expenses in liquid cash in a savings account or in your checking account. You need quick access to that money in case anything happens. But there are other places that you can save money.

1. High-Yield Savings Account

Beyond the Checking Account is the Savings account.

A savings account is a great way to keep cash liquid while earning a small amount of interest on the money. It will not keep pace with inflation, but the cash balance will grow and compound over time. If you keep adding more into the account it will grow faster.

This is the best option if you are savings for a big purchase like a house or a car.

2. ROTH IRA

Every year I make it my goal to max out my ROTH IRA.

Right now an individual can max out a ROTH IRA at $6,000.

A ROTH is a retirement account where you can contribute money and allow it grow tax free over time.

Because, a ROTH is not tax deductible from your income you will pay tax in the current year. Any money that you put into a ROTH account can be withdrawn from that same account at any time. Any gains that you earn on the money you put into this account cannot be withdrawn till you reach retirement age.

This account uses a similar strategy as an HSA. I keep a certain amount, lets say $2,000, in liquid cash within this account and anything over that amount I invest into the stock market.

Your ROTH becomes another Emergency fund.

3. Taxable Stock Brokerage Account

Just like your ROTH you can keep a certain amount of money in your stock account in cash for a rainy day. And then invest the money above that threshold.

With a stock brokerage account you may invest in your money in stocks and bonds. There is risk involved when investing into the market. You are also tying up the money into an asset. In order to withdraw cash from these investments you will first need to sell off your investments in the stocks/bonds. But the money is relatively liquid.

Modern technology has made it easy to buy and sell stocks quickly and receive cash.

The value of your stocks will fluctuate and sometimes drop significantly with the market. This is a risk you must be willing to take. Cash sitting in a tax brokerage account generally does not receive interest payments.

Keep in mind that if you sell your investments to use cash you may have to pay taxes on anything gained from these investments.

4. Bonds/Dividends

Treasury Bonds pay interest. Stocks pay dividends.

If you invest in these assets underlying value may change, but you will still receive regular cash payments.

You could use the cash to pay for expenses or allow the money to accumulate as savings.

5. Cyptocurrency

I debated about including this one on the list, but there is a reason to include it.

Yes you can invest in Bitcoin or another coin that might be considered speculative. But the coins that I consider good for savings are stablecoins like USDC. These are pegged to the US dollar. They will not change based on the change in the dollar not the demand for the coin.

There are many crypto platforms that pay a good interest rate on the money deposited into the account.

This could be a good place to save money, because there is an added layer between the user and access the cash. In order to change from the stablecoin into cash the user will need to sell the stablecoin back into US Dollars. This creates one level of friction between the user and their money which will discourage many people from using the money for random purchases.

These are all the different Savings options that a person can use to build wealth, save for goals or save for an emergency.

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