The act of saving money can viewed many different ways.  For example, you can ‘save’ money by contributing to a savings account at a bank.  And, you can save money by reducing the amount that you pay for credit card debt and auto loans.  In this article we discuss several options for saving money as well as general best practices when it comes to managing your money.

Emergency Fund

Too often we hear about people that are not prepared for unexpected expenses like car repairs, medical expenses, or other necessary, yet unplanned expenses.  This is where the emergency fund comes in to play.  Everyone’s situation is different but experts generally recommend having at least 6 months of cash available to cover unexpected expenses like car repairs, medical bills, home appliance repairs, etc.  Following a job loss, it can take months or even years to find employment in today’s economy.  Because of this uncertainty and potential for extended loss of income, your emergency fund should also include expenses such as food and shelter (mortgage, rent, etc) for at least 3 months but more typically 6 to 12 months.  

So, where do you put the money for the emergency fund?  At a minimum you can set up one or more online savings accounts with institutions like ING Direct, Discover, Ally Bank, etc.  The savings account will generally pay a better interest rate than your checking account.  Linking your savings account to your checking account is an easy and convenient way to transfer money from one account to the other.  For example, if you set up a saving account with ING Direct, you can link to your bank’s checking account by entering your bank’s routing number and your checking account number.  Transferring money back and forth is easy.  The key to remember is that money in your emergency fund should be readily available (highly liquid) to pay for immediate expenses.  It may be a good idea to keep a small buffer of money in your checking account while keeping the rest in savings. 

Savings, Money Markets, and Certificates of Deposit (CD)

Assuming you have your emergency fund setup, a general savings account is important to help fund those non-emergency expenses such as vacations, kids’ braces, down payments for cars or a house, etc.  Again, an online savings account is a quick and convenient solution to saving money at a rate typically higher than a checking account.  A visit to will show you the various savings vehicles and help you compare which ones best suit your needs based on the amount you have to save, your spending habits, and the withdrawal options.  The more popular savings vehicles include standard savings accounts, money market accounts, and CDs (certificates of deposit). 

A money market account can yield higher returns on your principal but may come with various restrictions such as a higher minimum deposit amount and/or a limited number of withdrawals from the account within a given time period. 

A standard savings account generally has a lower minimum deposit amount and usually does not carry the same restrictions as the money market account with respect to limiting the number of withdrawals from the account. 

CDs or certificates of deposit may yield a higher return but will generally come with higher restrictions than a standard savings account.  CDs are typically offered for 3 month, 6 month, 9 month, 12 month, 2 year, 3 year, 4 year, and 5 year maturity timeframes.  Generally, the longer the term, the higher the yield since you are essentially allowing the bank to hold your principal for a longer time period.  

Getting Started

Now that you’re familiar with the basics of saving money, visit to begin your quest for an online savings account.  Checkout the options available, minimum deposit amount, and yield prior to opening an account.  Once your new savings account is open, set up automatic deposits from your checking account to your savings account based on your available budget.