When should your savings account funds be invested?

October 04, 2022

Picture this: You’ve been socking money away in your savings account for some time and have a good safety net to fall back on in case of an emergency.

If this sounds like your savings situation, congratulations and good work! The majority of Americans don’t have enough in savings to weather a life-altering event, and roughly a quarter of Americans have no savings at all. The fact that you’ve saved a substantial amount of dough is worth some kudos.

The question now is whether some of those funds should be moved to an investment account so they can potentially grow with the market. Savings account yields are traditionally relatively low and won’t be able to compete with inflation, so if you have some money to spare, it may be worth making a move. Let’s break it down so you can make some important decisions on what stays in savings and what needs to be invested.

How much does one need in savings?

Remember, your savings account is secure and FDIC-insured, while investing in the market may lead to gains and losses depending on timing. Hence, stockpiling in savings first is key — but how much is enough? Here are some great guidelines on how much you should have in savings:

  • 3 months of expenses: Once you’ve figured out your budget and know what you’d need to survive every month, multiply that by three if you’re a double-income household and have stable and secure employment.
  • 6 months of expenses: It’s recommended that if you’re a double-income household with less secure and stable employment — or a single-income household — you should keep six months of expenses in savings to fall back on.
  • 1 year of expenses: If you’re an individual saving on your own, it’s a good idea to have a year’s salary worth of savings.

Once you’ve determined which of the categories matches your lifestyle, you can figure out how much you need to keep in savings. The rest is yours to play with — after you tackle some important questions.

Questions to ask about investing

There are two very important questions you need to ask yourself before investing your money in the stock market.

These questions work in tandem because in order to see substantial growth in your investment accounts, you’ll need to be OK with letting your money stay put while it ebbs and flows with the market. You’ll have a better chance of seeing growth if you determine how much risk you’re able to take with the funds to see long-term growth.

If you answered no to either question, you might want to leave your funds in the savings account for security and stability.

Whether or not you move your funds — and how much — to an investment vehicle is a big decision. We’ve got numerous options available here at UBT, so if the thought of diving into investing seems overwhelming, you can rest assured that you’re never alone in the process. We’re here to help guide you on the next steps should you think investing is the best option for you.

If you feel like you’re ready to jump right in and do some online investing on your own, we have options for that too! Our Online Investing platform will help you assess your risk tolerance and offer options for you based on your answers to a few questions. 

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