Balancing Your Savings Account with Other Account Options

A savings account is a good start to placing money aside, but it lacks the ability to increase your wealth that is presented by many other options. If you have the extra cash to allocate toward multiple savings methods each month, consider balancing your accounts in a strategic manner.

Savings Account

Your savings account should be large enough to sustain you for three months if you lost your job. This includes payment of all debts, utilities, and mortgage or rent plus living expenses. Once your account is sufficient in this way, you can stop allocating funds toward it. The holdings should be 100 percent liquid, meaning they are strictly cash savings.

Retirement Account

Next, begin allocating toward retirement. Consult a financial adviser if you are uncertain how much you will need to save. Most Americans find they are not saving enough after this discussion. Typically, between 3 and 6 percent of a salary should be allocated to this account.

Investments and Illiquid Assets

Finally, if you have enough cash left over after depositing to your retirement and general savings accounts, consider starting investment accounts. The amount you allocate here is entirely up to you. These investments can include securities, which are fairly liquid, but may also include illiquid assets like real estate.