The stats are alarming: over half of Americans are uncomfortable with what they have stashed away in their emergency savings, according to a Bankrate survey from earlier this year. And only 44% find they can cover a $1000 expense with their savings.
So, if you have a savings account, especially an emergency fund consisting of three to six months of emergency expenses, that alone deserves a pat on the back.Having savings is crucial to financial health, but sometimes it’s not enough just to have money sitting in your account. By making your savings work for you, you’ll hit your financial goals faster.
Park your funds in a High Yield Savings Account
I say it all the time — open a High Yield Savings Account. HYSAs are all the craze right now, and for a good reason. These special savings products pay a higher than average APY (Annual Percentage Yield) compared to regular savings accounts. Many banks also offer HYSAs for free and you can open them with very little money upfront.
You’ll also earn interest on the interest payments, too (something that is called “compound interest” in the finance world.) A pretty sweet perk for your emergency fund, right?
Maximize your savings: Best high-yield savings accounts
It’s easy to open a HYSA, and many online banks will give you a pretty quick approval. There are so many options for a good high-yield savings account — but if you need ideas on where to turn, check out my favorites here.
Take advantage of automation
Save without lifting a finger by taking advantage of automated features like roundup savings. Round-up features are offered by many banks and financial institutions. They work by rounding up the change on your purchase and automatically depositing it into your savings account.For example, if you spend $12.49 on your lunch, the total amount posted is $13.00, and $0.51 is automatically deposited into your savings. This may seem like petty cash, but it can really add up over time.
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Bonus tip: Consider setting a percentage (or flat amount) of your money to automatically go to your savings account on payday. This saves you a step of remembering to manually deposit your cash.
Open a Health Savings Account (if eligible)
Health Savings Accounts are a fun savings hack for covering your medical-related expenses. This is because they are tax-advantaged accounts. HSAs are funded with pre-tax dollars and your withdrawals (distributions) are also tax-free, provided you use the money for a qualified medical expense.
There is a catch though — you have to qualify for an HSA to open one. To qualify:1. You have to be covered under a high-deductible health Plan (HDHP)2. Not be insured under another health plan3. Not enrolled in medicare4. Unable to be claimed as a dependent by someone else.But, if you are eligible for an HSA, open one. You are not only saving for your health expenses but saving money on your tax bill. HSAs can be funded to the IRS maximum limit which for 2025 is $4,300 (single plans) and $8,550 (family plans.)
Pay yourself first
Establishing good savings habits and determining what your savings goals are is a crucial part of financial health. Whether you are working on your emergency fund, or saving for your dream vacation, there are many ways to maximize your savings.For more savings tips, follow me on Instagram where I share the best ways to make your savings work for you.
Erika Kullberg is a lawyer and personal finance expert. You can find more of her work at Erika.com.
