As a freelancer, my income can vary greatly from month to month. The general advice is to just sock away money in a savings account whenever you can so that those lean months aren’t so lean. Good advice. I thoroughly recommend it. But that savings account had best be a high yield savings account — the type that keeps your money making money while it sits in the bank.
Your standard savings account with your bank typically gets you about a 1% return on your money. It’s better than nothing, but who wouldn’t prefer getting 4% or even more? That’s what the shift to a high yield savings account can get you.
Admittedly, it’s not the high returns you could get from the stock market or other types of investments, but we’re talking about your emergency fund, here. You want it liquid, easily accessible and protected — not subject to the whims of Wall Street.
There are other things that you should consider chucking into a high yield savings account if you can:
- Taxes: Since you’re responsible for your own employment taxes, why not save them in a spot where you can get a little return for your wise planning?
- Insurance: Do you pay your insurance in quarterly or annual chunks? Save it up in your high yield savings account ahead of time.
- Big purchases: Are you working on a down payment for a new car? What about that big TV you’ve been lusting over? Start tossing your spare change at your savings account and get enough just a little bit faster.
Now, there are a whole slew of banks that offer high yield savings accounts, and it can come down to what’s the most convenient option for you. The only absolutely necessary quality is that an account is FDIC-insured, meaning that the federal government insures your deposits if something happens.
If you’re a member of a credit union, try checking out their options first — they tend to offer great rates, although your regular bank may have a good offer if you already hold accounts with them. Otherwise, I’d suggest taking a look at this list at Get Rich Slowly. A lot of people have weighed in with their preferences in the comments and made it a great resource.