By Tatiana Walk-Morris, Vox featuring Samantha J. Garcia, CFP®, AIF®, CDFA®, Wealth Advisor at Halbert Hargrove
For Leslie, a 40-year-old first-generation Latina immigrant to the US, her inspiration for opening a new high-yield savings account came from Instagram, specifically The Avocado Toast Budget and Delyanne the Money Coach.
Until 2021, Leslie (who asked that her last name be withheld due to the sensitivity of discussing finances) had not known what a high-yield savings account was. She dropped out of college in her early 20s and had worked various retail and customer service jobs, but she hadn’t learned about credit and had damage to her own, she said. “Last year,” she explained, “I got a new job, [and] I had a lot more money than I normally ever had, so I felt like I probably should start doing something with it.”
Hearing about high-yield savings accounts on social media combined with finally having the stable, livable income to set aside money prompted her to start researching different accounts, she said. After researching online and combing through websites like Nerdwallet to find the right one, she decided to open a high-yield savings account with Ally Bank, because the bank offers a feature that lets users categorize their savings accounts to meet goals such as saving for a new car, she said. If you haven’t begun saving for emergencies or investing for the future, you’re not alone and it’s nothing to be ashamed of, especially if you don’t earn enough to save. A July Next Advisor survey of 1,000 adults found that only 21 percent have a high-yield savings account and 16 percent had certificates of deposit (CDs) or money market accounts (MMAs). Like Leslie, other people who can now afford to set aside some cash may not know where to put their money to save for emergencies and build a nest egg for the future.
Per the New York Times, the Federal Reserve is planning to raise interest rates again in an attempt to curb inflation. The stock market is fluctuating wildly. For some, the economic volatility can be anxiety-inducing. And for people who can save for an emergency fund and invest in the stock market, figuring out where to start can be overwhelming.
Thankfully, you don’t need to be an expert — or extremely wealthy — to find a reasonable savings account and begin investing. Here are some general guidelines (not concrete financial advice) from financial planners and a therapist on how to get you started on maximizing your savings, beginning to think about investing, and calming your financial anxiety.
Reduce your financial anxiety by learning what you can and can’t control
While headlines about the fluctuating economy are scary, it’s important to focus on the things you can control, and the stock market and the Federal Reserve are not on that list, said financial therapist Lindsay Bryan-Podvin. She encourages clients to find ways to reduce their financial anxiety, such as listening to less stock market news or limiting their time on social media, and instead lean into coping mechanisms such as meditating, breathing exercises, or other spiritual and emotional practices.
“We know that all of that news overstimulates our nervous system. It can make our anxiety worse when the reality is, no matter how many times you refresh Twitter, it’s not going to change what’s happening in the stock market,” Bryan-Podvin said.
This economic volatility can be especially scary for members of Gen Z, who might not recall the full effects of the Great Recession and are experiencing this uncertainty as adults for the first time, Bryan-Podvin pointed out. Plus, financial anxiety can cause us to overlook the data available about market cycles; however, it’s important to remember that recessions tend to be for short times compared to growth periods, she said.
“It’s really easy for our brains to go, ‘Oh, my gosh, the sky is falling. It will always be this way,’” Bryan-Podvin said. “Most of them are not planning on retiring today or tomorrow. Most of them are planning on retiring in 25 years or 30 or longer. So, it is very important to remind clients that money is only a loss in the stock market if we sell it. If we don’t sell it, we actually haven’t lost anything.”
Of course, the Covid-19 pandemic makes the current economic volatility different from previous periods of instability. With all the stress, pain, and disruption the pandemic has caused, Bryan-Podvin encourages clients to think about whether their career is financially and emotionally worth pursuing.
In some cases, clients have concluded that their employers aren’t prioritizing their health and safety and have transitioned to work-from-home careers and others have negotiated additional time off, implemented out-of-office boundaries and secured better health care benefits, she said. And some clients are building up their savings and updating their resumes in case of layoffs at their workplace, she added.
Set a manageable savings goal
It’s hard to know exactly how much to save for emergencies. Should you save three to six months’ worth of expenses? Should it be a year’s worth? How much could you conceivably save to feel safe amid the economic disarray? Ultimately, that answer depends on your situation.
When the clients come to Bryan-Podvin with anxiety about their savings, she advises them to determine how much money they could save to feel safe and secure. Then they calculate the impact of inflation on their savings in the long term.
For Leslie, the option to divvy up her Ally savings account into specific categories was more manageable than the typical financial advice of having three to six months’ worth of emergency savings. So far, she has started a category for rent in case she needs extra money to cover that, an auto repair category, and a vacation fund, she said.
Shop around for better interest rates
Damian Pardo, regional director for First Horizon Wealth Management, recommends people with assets under the FDIC limit of $250,000 to look for savings and certificate of deposit accounts online that are paying higher than the interest rates at large banks. While major banks like Chase, Bank of America, or Wells Fargo have not paid the highest rates recently, Samantha Garcia, wealth adviser at Halbert Hargrove, said consumers may be able to find better rates at online banks. It’s best to keep your emergency savings in an accessible account but keep access savings in a bank account with better interest rates, she added.
