4 things you should do when your savings reach $5,000.
Saving money is a crucial part of your financial plan. After all, your savings is what helps you cover unexpected bills or expenses, weather financial downturns or cover many of the big purchases you’re planning to make.
But while saving is important for your financial health, the reality is that putting money away for a rainy day isn’t all that easy — and many people struggle to find room in their finances to do it. In fact, over a third of Americans (37%) lack enough money to cover a $400 emergency expense, according to the Fed’s 2022 Economic Well-Being of U.S. Households survey .
Considering how many people are struggling to add to their savings accounts , hitting your first $5,000 in savings is a big milestone. And, if you’ve met that threshold — or are close to it — there are a few things you should do to keep the momentum going.
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Now that you’ve got $5,000 tucked away in your savings, consider making the following moves:
Earn more from your savings
One way to make your money work harder for you is by diversifying your accounts. And, there are two low-risk options you should consider: a certificate of deposit (CD) and a high-yield savings account .
A CD is a low-risk, interest-bearing savings option that typically offers higher interest rates than regular savings accounts. However, that comes with a catch – your money is locked in for a fixed period. This can range from a few months to a few years, and during that time, you typically can’t withdraw your funds without paying a penalty for early withdrawal.
That said, CD rates are particularly high right now, with many offering rates over 5% , so putting at least part of your savings into one can make sense. That can be a great way to earn a guaranteed rate of return from your savings if you don’t need immediate access to the funds.
You should also explore high-yield savings accounts, which offer better interest rates than traditional savings accounts. These accounts often have no fees and are a safe place to park your emergency fund or short-term savings — and you’ll retain access to your funds.
Look for an account with a competitive annual percentage yield (APY) to maximize your earnings. Rates are elevated right now, so many high-yield savings accounts offer APYs above 4.5% currently — which, when coupled with a high-rate CD, can help you get more out of your $5,000 in savings.
