I get so many emails and DMs asking about specific situations like I have $55k sitting in a HYSA - should all of that be in there? I have a $150k in savings waiting for a house…where should that live right now? And the list goes on and on and on.

 

The thing is - these questions aren't about saving vs investing. 

 

That framing is why SOOO many people end up making decisions that don't match their actual life circumstances. The real question you need to ask yourself is when do you need the money? Answer that first and everything else gets a lot clearer. 

 

So let's get into the buckets…

 

The three bucket framework.

Put in a HYSA!

 

This is for things like your emergency fund, or a down payment on a house. Basically any money you know will need readily available. 

 

This bucket simply has one job - to be there when you need it. It can't afford to lose value in the stock market cause you don't have time to wait for it to recover. The best HYSAs are paying around 4% APY right now - meanwhile a normal savings account is earning a very depressing .38%.

 

If your money is sitting in a regular savings account you are leaving real money on the table every single month for no reason. Move that money over to a HYSA now please!!

 

This is the bucket most people don't know what to do with. You don't necessarily need the money tomorrow but you do need it relatively soon - like for your dream home in the burbs in three years, or an engagement ring, or a new business you're starting. 

 

The stock market could drop 30% right before you need it and that would be a  *devastating* time to find out your down payment is no longer there lol.

 

The best CD rates right now range from 4% to 4.50% depending on who you go to. A two or three year CD locking in a guaranteed rate is genuinely not a bad option for this bucket.  Short term bond funds are also worth looking at. 

 

The point is - not fully in cash earning nothing extra, and not fully in the market where it can drop right when you need it.

 

This is the bucket for things like retirement, long term investments - basically all the money for future you. 

 

This is what index funds and Roth IRAs are for. The stock market has historically returned 8 to 10% annually over long time horizons and that number only works if you actually leave the money alone long enough to do its job. This is the magic of compounding that I won't shut up about.

 

So if you've been wondering “why not just throw it all in an investment account.” It's because some of it you may need in a year, and the market only works for you if you can afford to leave it alone and ride out the bad years. 

 

last thing on this - FDIC Insurance. 

A lot of people are banking with apps they found from their internet bestie on TikTok lol. No judgement! But I need you to answer one question right now - is this a bank? Or is it an app that uses a bank?

 

FDIC insurance covers your deposits up to $250,000 if a bank fails BUT this only applies to FDIC insured banks. It does NOT automatically apply to fintech apps that partner with banks and in some cases the pass through coverage has conditions people only find out about when it's too late for them.

 

Checking this will take you 45 seconds - go to banks.data.fdic.gov/bankfind-suite/bankfind and type in the name of the place you're using. If it comes up as a member bank you are covered. If it doesn't, that doesn't mean you're not covered but you need to dig into exactly how your money is protected.

 

Most fintech accounts are perfectly fine. But it's always good to check.

 

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