Hey guys!
Kinda curious as to other options for maximizing my wealth. Currently, I have $8k saved up for an Emergency Fund and I was going to put it into a HYSA, as that is what most people recommend, but after thinking I became curious.
Would I optimize my moneys growth if I was to place the $8k into a Brokerage account tracking the S&P 500, since the average return is 10% compared to a 4.6% HYSA? What would be the downsides to this?
Also, would it be beneficial to put money into a HYSA that I plan to use to buy a PC within a month, or should that just go into a regular savings account to keep my Emergency Fund and Super Short Term goals separate?
My current finances are:
$2k into a Vanguard Roth IRA with 100% in VTI
$8k-9k will be put into a HYSA or other account for Emergency Fund
$2k-3k in checking for daily purchases/to have accessible
I also have 5% of my paycheck going into a TSP with that being 100% in the C fund. I plan to max my Roth IRA and then put as much as I can into the TSP.
I’m super new to investing and I’m also a brand new E-3, so any help is very much appreciated!
HYSA vs Other Options as an E-3
byu/Asylum36 inMilitaryFinance
Posted by Asylum36
4 Comments
First – good job getting started with savings and taking your finances seriously while junior! I would suggest not putting your emergency fund in a brokerage account. Generally, you want relatively immediate access to emergency funds when they are needed, a brokerage account will likely take a day or two to process selling your holdings and transferring them to you if needed. Additionally, I wouldn’t want my emergency fund subject to market swings. I don’t want the potential for an emergency to correspond with a dip in the market, and now I have less money available. Other than that – I think you’re on the right track with putting 5% into TSP, then Roth IRA, then whatever else you can afford to TSP.
Hey also an E3 so we’re in a similar boat,
Hysa account are better for emergency funds since you can’t loose money meaning, the 8k you have right now lets say you put it into something like VOO today and next month market comes down a bit, it could turn into $7500, and hopefully you don’t have an emergency but if you did now you lost $500. Versus a Hysa which can’t go below that 8k mark only up.
For the Pc me personally I would put the Pc on my credit card only if i knew I had the money to pay it immediately and doesn’t go past my 30% usage which it seems you have the money currently. As well credit cards give cash back or points which sometimes you can leverage to be worth more depending if you use for airlines, hotels etc.. You can use the money in a HYSA but it’ll only earn a month’s interest as well it’ll take a couple days to transfer depending on the if the Hysa is connected to your checking account.
One of my favorite things is AMEX right now I have the Platinum as well as there Hysa account. So typically I put bigger purchases on that card (like your PC) and I can transfer money from my Hysa with them to pay it off same day since they’re all connected in the app.
Browse around which Hysa would be best for you ik amex is like 4.25 currently but I think something like sofi is up to 4.6
For short term saving I go with my bank (Wells Fargo) since it’s linked with my checking account just easier. Also I’m not recommending wells just stating what I use. You can use who ever you feel is best. Any long term savings that ik I won’t use for less than 5 years I’ll put into a CD
Any thing else that Ik I’ll use over 5 years from now throw into stocks.
If you already have a Vanguard account for Roth, just open a taxable account and throw some $ into the money market fund and it’ll act as your HYSA at over 5% while being easily accessible. You’ll be able to see all your Vanguard accts in one place when logged in.
Putting your emergency fund in the stock market is a lot riskier because market crashes often happen during times of mass layoffs. This could mean needing your emergency fund when its value has dropped, forcing you to sell at a loss. A high-yield savings account (HYSA) is a safer choice because it offers the liquidity and stability you need for an emergency fund. If you go with an HYSA, check out sites like Bankrate or [Banktruth](https://banktruth.org/savings) for updated rates. For short-term goals like buying a PC, keep that money in a regular savings account to keep things separate.