In Which Situation Would A Savings Account Be The Best Investment To Earn Interest?

Like all investment decisions and planning, risk tolerance is the most significant factor in making investment decisions.  Also, it’s good to know right away, in which situation would a savings account be the best investment to earn interest?

Based on your risk tolerance, in what situation would a savings account be the best investment to earn interest?  

Low-Risk Tolerance or High-Risk Tolerance?

When I talk to fellow F.I.R.E-types, risk-tolerance is a trigger word. Like some inner insecure machismo is sparked inside the investor, they boldly must proclaim that their risk-tolerance is the highest and will stand firm against any storm!

Well, it isn’t my goal to trigger people when I want to discuss risk tolerance and investment means.

So, In Which Situation Would A Savings Account Be The Best Investment To Earn Interest?

Now, let’s discuss this without trying to trigger some benign machismo in each other.

Let’s use another set of words: How liquid do you want your money to be?

When are you planning to use the money, or how fast do you need access to your money? Can you plan to withdraw immediately, like with Step 1: Starter Emergency Fund of Financial Peace University‘s Baby Steps? 

Or do you have months, years, or decades to plan for withdrawal?

When I mention decades, my younger friends laugh, thinking decades are like millions of years. Decades for a planned withdrawal of your money is realistic; it’s your retirement planning.  

You usually only have four to five solid decades of working before you must stop working forever.  

This is not financial advice, and we need to plan wisely, always, and that’s what we are here for – sharing ideas, seeking information, and making the most of our hard work.

The Big-Picture Of An Investing Person.

Life might be measured in one unit, a person, but that person’s life is broken into smaller parts.

Decades, Years, Weeks, Day, Hours, Seconds, etc.

Time is a factor we have the least amount of control over – not money.  

You can lose all your money by bad decisions, much in your control. You can have a ton of cash dropped into your lap with a winning lottery ticket; again, you must buy one first(not that I recommend it), but it is in your control.

Time can be wasted, which you can control, but again, you will never have time awarded to you for hard work or as a lottery winner.  

Time for me, I correlate as a significant factor in risk tolerance. Do I have time to recover if I lose money from my investments? Do I need the money immediately if my investment drops in value suddenly? 

If I need access to my money fast, then I can avoid losing value in the short term, so my risk tolerance is low for this money.

Notice I associated risk tolerance with the money’s purpose or timeline, not my makeup. So, I didn’t trigger my inner-money-machismo; you shouldn’t try to consider your risk tolerance.

Wow, that was long; I have to tip-toe around answers from reactions I get during simple investment discussions. We are not married to our investments, and life is a team sport; let’s work together.

My Simple Answer:  In Which Situation Would A Savings Account Be The Best Investment To Earn Interest?

A savings account is a great place to earn interest while holding money for an event, planned or unplanned, needed on short notice.

I like to call Fast Cash for any money needed immediately.

Examples of Fast Cash I Still Invest:

1. Starter Emergency Fund Step 1 of FPU.
2. Money budgeted for coming repairs(house, car, etc.) or events(Summer Vacation, Christmas Shopping, Birthday presents, etc.)

Why Savings Accounts For These Situations?

Savings accounts offer the quickest access to stored cash.

That’s it.

Whether the savings account returns high(HYSA) or low interest, the driving force for using a savings account for an investment is fast access to your stored money.

My Savings Account Use Example:

I keep a minimum balance of $1,000 in my savings account, which is attached to my checking account.  

Over the years, I saw almost zero interest rates, requiring high balances or bank money market funds(yuck). Today, my Bank Savings Account(attached to my checking) is a Yield Savings Account through SoFi Online Banking.

If I need money immediately, I move money from my savings account into my checking account.  

Or….. I have a savings account set up if I need money in my checking account immediately, say not thinking right occasionally in addressing an immediate financial need; if I overdraw my checking account, my bank automatically moves money from my savings.  

The story’s moral is that the money in my savings account is there for immediate access. And, no matter how little or a lot of interest it earns, the savings account is an excellent investment for Fast Cash.

Review

So again, IMHO, if you need access to your money immediately, regardless of the interest rate, a savings account is a great investment choice.

If you are doing something different with your Fast-Cash or have feedback, please comment below. In the meantime, good luck with all your financial decisions.

Myself with an interesting Bull Sculpture. Notice: No Lambo’s. :/

Hi I’m Tom, A Blogger And A PIG Farmer. Well PIG Farmer as in I grow Passive Income Generators(PIG’s). I’ve been playing with stocks, mutual funds, and options for decades, and unlike what you read online, I’ve yet to find a way to get rich quickly. My journey has been long and continues. I hope to have so many PIGs I can stop working at my current job and volunteer as a medical worker overseas.  Still waiting, but getting there. I still am a family man, and while on this Journey of Growing PIGs.   I wanted to share my adventures(ups and downs), hoping you will contribute with your feedback and comments. Fun Fact: In my spare time, I am a Band-Dad!