Updated: Feb 26
Your nest egg is the first step to fixing your finances. A nest egg is a savings account kept for emergencies and should not be touched unless absolutely necessary. The nest egg should be enough money to cover your total expenses for 3-6 months.
Aim for Higher Interest Rates on Your Nest Egg Account
You do not want to risk your nest egg on investments, but that does not mean you should leave it in just any regular savings account. Many standard savings accounts pay well under 1% interest. If you search for the best APY, you will find that you can get much higher returns with no risk. American Express currently offers 3.5% APY on their High Yield Savings Account and Robinhood offers as high as 4%.
Budgeting for Your Nest Egg
If you are having a hard time building your nest egg then you will want to make sure your budget is up to date. You might think you know where your money is going but trust me.....you don't. A budget is critical for understanding how close you are to the starting goal of 50/30/20.
The 50/30/20 Goal
This goal says 50% of your income should go towards needs. The next 30% is for wants, and the last 20% is for savings. You will want to continue this until you have your nest egg built and should aim for adding more than 20% in savings each month. Once your savings is built, this money will start to go towards investments.
Finding the Inspiration
It can be difficult to break free from old, bad spending habits. Remember to keep your goals in mind. Once you achieve your savings goals, you will know that it was worth it. There are countless resources you can turn to for inspiration. I recommend "Who Moved My Cheese?" or "Rich Dad Poor Dad." You can find these books and more on our reading list.
Investing Once You Are Ready
Investments can be fun and exciting. Depending on your method it can range from extremely high to relatively low risk with equal returns. Fortunately, there is another type of account for the feint of heart.
Playing It Safe
If you are looking for higher returns with no risk, you should consider a Certificate account. This generally offers a higher APY but comes with terms. This means you cannot withdraw from the account until you have satisfied the term limit of the account. The term limits and interest rates vary, but they seem to offer the best rates around the 1-year term limit. Navy Federal will allow you to sign up on the app and transfer money straight from savings without having to visit the bank.
Be sure to subscribe and receive our FREE budgeting template. This will allow you to plug your own numbers in and see what you have left each month after bills are all paid.
Today is the day to become financially aware. If you already have a nest egg built up, be sure to check out our post on what comes next!