Tom has a year of emergency savings and extra money sitting in a high-yield account. Ramit tells him savings won't grow enough and recommends target-date retirement funds instead. He also suggests planning for big life expenses like a house down payment or marriage using a ten-year strategy.
Here's a question from Tom in Mountain View, California. He asks. I've been really good about keeping my expenses down, finding multiple sources of income and building a 12 month emergency fund. Through all this I've saved up quite a bit of extra money which is currently sitting in a high yield savings account. I feel like I should be doing something more with this money, but I'm not quite sure what the best thing would be. It's funny, in TV you have these common tropes, you know, things that you see that are always happening. Like at the end of a military movie, there's like a salute. And then in money you have the same sort of five to seven questions and one of them is the classic I have money and I don't know what I should be doing with it. So this is a great question. Let me try to address it in a strategic level and then tactically as well. At a high level, savings is not enough. Okay, let me say that again. Just saving money in a savings account is not enough. To really get growth with your money, you need to be investing it so that it's growing for you. A savings account is generally just going to sit there. Sometimes it even loses money because of inflation. So I didn't hear Tom mentioning anywhere that he has started investing and that would be my first recommendation. So most people don't do this because they don't know how to invest. They're really nervous. They're like, oh my God, I don't know how to pick stocks. No individual investor should be picking stocks. Okay, so you don't need to do that. There are some really simple advice you can do. At a high level you basically want to look for low cost target date retirement funds. I talk about all these details in my book in huge amounts of depth port, but in general a low cost target day retirement fund, you just put money into it and it handles the rest for you. Alright, that's it. Now another thing. I'll share some interesting insights I learned from a survey I did with thousands of people on my site. I asked people in their 20s, 30s and 40s what they wish they had saved more for. Okay, here's what we found. People in their 20s wish they had saved more for travel. People in their 30s wish wish they had saved more for a down payment on a house. And do you have any idea what people in their 40s wish they'd saved more for? They wish they'd save more for retirement. So you always want to be thinking ahead with your money. A 12 month emergency fund is great. But there are going to be things that predictably come up. Most of us will get married. Most of us will buy a house. Most of us will go on a honeymoon. All these things. Most of us will buy diapers. Let's ask people 10 years older than us. I call it the Ten Year Saving Strategy. Go take some people out for coffee and say, hey, what are the things you, you did not anticipate that you find yourself spending money on? Oh, flood insurance. Never thought of it. So these are the ways you can start using savings and also investments strategically. And that's my answer. Good luck tomorrow.
