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Optimize Your Savings with O1ne Mortgage

Saving for the future is crucial, whether you’re building an emergency fund or setting money aside for retirement. Being strategic about your savings can help you achieve better returns and grow your money faster. Here are five simple strategies to optimize your savings.

1. Open a High-Yield Savings Account

Not all savings accounts are created equal. Traditional savings accounts, often offered by major banks, had an average interest rate of just 0.47% as of March 2024. High-yield savings accounts, typically offered by online banks, provide much better returns. As of April 2024, some rates are up to 5.35%.

You can link a high-yield savings account to your checking account and make transfers whenever you like. This makes it a good place to keep your emergency fund or cash for other financial goals. Just keep in mind that some financial institutions limit consumers to six electronic transfers and withdrawals per month on savings accounts.

2. Leverage Certificates of Deposit (CDs)

Certificates of Deposit (CDs) allow you to put money away for a predetermined amount of time. When the term ends, you’ll get back your initial investment plus interest. APYs for CDs are usually higher compared to savings accounts, with some rates as high as 5.5% as of April 2024.

The main downside is that CDs don’t provide easy access to your money. Early withdrawal penalties can be significant, depending on your CD term and the amount you withdraw. However, CDs can be a good holding place for money you don’t plan on using in the immediate future.

3. Automate Your Savings

Getting into the habit of saving can pay off over time. Automating your savings can make things even easier because you won’t have to manually transfer money into your savings account each month. Set up automatic monthly transfers to remove the temptation to spend that money while it’s in your checking account.

Just be sure to account for these transfers in your monthly budget to prevent accidentally overdrawing your checking account.

4. Use Tax-Advantaged Accounts

Some accounts offer tax perks while you save. Here are a few tax-advantaged accounts to consider:

• 401(k)s: Employer-sponsored retirement accounts that allow you to make pretax contributions, reducing your taxable income. Withdrawals count as taxable income.
• Individual Retirement Accounts (IRAs): Traditional IRAs allow for tax-deductible contributions with tax-deferred growth. Roth IRAs are funded with after-tax dollars, allowing for tax-free withdrawals in retirement.
• Health Savings Accounts (HSAs): For those with high-deductible health plans, HSAs offer tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
• 529 College Savings Plans: Save money for education expenses with tax-free qualified withdrawals. Some states offer deductions and credits on 529 contributions.

5. Spread Your Savings Across Multiple Accounts

Another way to optimize your savings is to leverage multiple accounts. For example, you might keep some money in a high-yield savings account while investing a lump sum in a CD. You might even have more than one high-yield savings account, each devoted to a different financial goal.

CD laddering is another option, involving holding multiple CDs with various term lengths to provide liquidity on a rolling basis as each one expires.

The Bottom Line

You have options when it comes to optimizing your savings. Leveraging high-yield savings accounts, CDs, and tax-advantaged accounts can help you get the most out of your money—especially if you have multiple accounts and automate your savings.

Be sure to prioritize your credit health as you build your savings. A strong credit score could unlock good rates and terms on personal loans, mortgages, credit cards, and more. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals.

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