Setting aside money should be simple. The best mobile apps for you to start saving your money so you can save safely and easily find the best way to get ahead.
Having a safe place to set money aside is an integral part of financial planning. Experts suggest setting aside enough money for at least six months of living expenses. Saving money not only helps secure our future, it also helps give us peace of mind in the present.
When it comes to setting money aside, we now have far more options than a traditional savings account. Mobile apps have made it easier than ever to set aside money and earn a good yield on it. But with all the options in the app stores, where do you start? How can you ensure you are downloading the best apps to set aside money for a purpose?
Most people don't think about maximizing their return on the money they set aside for the future. But with a bit of research, you can find many reasonable, safe solutions that offer much higher returns than the 0.1% or less you receive in your bank account. This article will cover what to keep in mind when setting aside money and dive into a few unique options that make saving money easy!
The best apps for setting aside money are on mobile. Mobile apps give you easy access to your money and ways to use it that weren't available ten years ago. The apps dedicated to setting your money aside are each slightly different.
When you break down savings, you must remember three things: lock-up period, APY, and risk.
A lock-up period is a period of time when the user can not withdraw their money from an investment vehicle without incurring a penalty. Assets that typically have lock-up periods include bonds and Certificates of Deposit (CDs).
When investing in either bonds or CDs, you must agree to a certain length of time that your funds will be locked up. Often, the longer the lock-up period, the higher the interest rate you receive. However, you will be steeply penalized if you need to withdraw your money before the lock-up period ends. You may even lose some of your principal investment.
While CDs and bonds can be good options if you know you won't need to withdraw your cash soon, they should only be considered as a backup option for people who already have enough money set aside in their savings account.
Annual percentage yield, or APY, refers to the yield you receive from the money you set aside in an investment. For example, an APY of 3% means you earn 3% per year on your total balance.
Often people think that the app with the highest APY is the best for setting aside money. However, a higher APY usually means higher risk. If the risk is higher than you feel comfortable with, an alternative option with lower risk and reward may be a better fit for you.
The most important risk associated with a savings vehicle is "principal risk," or the risk that you could lose money and wind up with less than your initial investment.
A typical savings account, for example, has very low principal risk. Even if the bank you invest with were to go bankrupt, you still have FDIC insurance up to $250,000. Stocks, on the other hand, have high principal risk since the money you invest can easily fall in value.
When setting aside money for the near future, you should avoid principal risk. However, if you set aside money for a long-term goal, like retirement or a down payment ten years in the future, it's ok to invest in assets with some level of principal risk since they have a better chance of paying off in the long run.
This article details some of the best apps to set aside money for a special purpose. Each is unique and has different ways of generating yield. It is important to keep an open mind when you look at any savings or money-making opportunity. Remember the three big pillars discussed above: lock-up, APY, and risk. The best apps to set aside money for a special purpose will be the one that fits your specific criteria.
Outlet offers a new way to save money: investing in stablecoins. At Outlet, we take pride in building a platform that makes saving money easy and worthwhile. We want to make it so easy to set aside and earn a yield on your savings that you would be crazy not to.
Investing in an ultra-high-yield savings account alternative means a lot to users who have only had access to traditional savings accounts.
Outlet users receive 5% APY and have historically earned as much as a 9%. Banks, on the other hand, are often below 0.1%, and even the best options max out at about 2.5%. No traditional savings app has similar returns to Outlet.
Outlet has similar traditional finance features such as insurance protection and ACH transfers.
One key advantage of Outlet over CDs, bonds, and traditional savings accounts is unlimited withdrawals. Outlet has no lock-up period, or limits on withdrawals of any kind, unlike savings accounts.
Our customers regularly report that our app feels like an extension of their bank account. This extension serves as a bridge to move money from your low-interest savings account into an alternative high-interest account and allows you to withdraw to your bank anytime.
Fundrise is a popular way of saving and setting aside money for a purpose. People who use this app like it because it allows them to invest in real estate in "hot" markets. These markets are attractive for people who want to invest in real estate but can't afford to on their own.
However, unlike stocks or savings accounts, real estate is not a liquid asset. That means you can't always get out of your investment and receive your cash quickly.
While Fundrise does allow users to request their investments, those requests are subject to approval by Fundrise, and users are not guaranteed they can always withdraw quickly.
Due to the illiquid nature of real estate, Fundrise and similar apps suggest that you plan to use their app for at least five years.
Five years can be a long time, and even then, when you need the money, you might not be able to withdraw it. So if you are the type of person that needs guaranteed access to your cash, Fundrise may not be for you.
Robinhood is one of the most well-known investing apps on the market that changed the game by making trading stocks free. While an app like Robinhood includes principal risk, it can be a great solution for people looking to save money long-term. As long you make the correct decisions, there is no reason why you can not see a handsome reward. Even holding a simple ETF yielded around 30% in 2019.
However, using stocks as a savings account can be a bit tough. Watching your principal investment swing up and down every day can get emotional. You might feel buying when the market is high and like selling when it is low. This type of behavior will, of course, cause you to lose money.
A common misconception of the stock market is that traders make more money than average investors. This is not true. Most traders do not beat the market, and many actually lose money. This means you are likely better off holding stocks rather than trading them.
When setting aside money for a special purpose, you should usually only invest in stocks for long-term goals. If you do invest in stocks, it's usually best not to overthink your investments and instead spread your money across index funds and ETFs with broad exposure to the overall market.
The positive side of using stock apps to set aside money is that, unlike real estate, stocks are liquid assets. That means you can sell them whenever the market is open, giving you easy access to your money when needed.
Savings accounts are some of the best options out there when it comes to safety. While many banks have almost non-existent interest rates, high-yield options like Ally Bank, Wealthfront, Chime, and many more have rates as high as about 2.5%.
These options also include FDIC insurance up to $250,000, making them an excellent choice for setting aside money if security is your primary concern.
Traditional savings accounts fall short in terms of yield but have very high liquidity and safety, which is all certain people care about. Other options allow you to earn a return with similar security in terms of principal risk. Outlet would be a good example.
Stash is another one of these savings apps to set aside money for a special purpose. The purpose can depend entirely on you. Money can be saved in a few different ways using the stash app.
Stash is an excellent app for those looking to create an easy, automated investment strategy for the long term. Although its primary value is around investing and not pure savings, it can be used as another account type to make money with, depending on your financial plan.
When you think about how to set your money aside, it's best to keep an open mind—plenty of people set aside their money in alternative assets or investment vehicles. Some find niches that pay off well if they focus on their interests and get creative.
One of our personal favorite alternative investment niches is Magic: The Gathering. Using Magic: The Gathering as an example, people find undervalued assets everywhere.
Magic: The Gathering has what's known as card sets. When an old set is finished printing, those cards tend to be worth more because no new copies are created. Several communities have similar opportunities in their niche.
One of the experts in this is a YouTuber named Alpha Investments, who makes a lot of money just by investing in Magic: The Gathering cards.
There is no right or wrong way to set aside money and watch it grow. People who save with Magic: The Gathering cards prove there is no single right way to set aside money.
Setting aside money for the future is often best done in cash using an application. However, there are many assets you can buy to set aside money, such as real estate, gold, silver, or even Magic: The Gathering cards, so don't be afraid to get creative and try new things.
Setting aside money for your property taxes can be tedious. Nobody wants to set aside money for taxes ahead of time, but when the date approaches, you will be glad you did so.
The issue is there are so many ways to set aside money. You might not know where to begin with all the different products on the market.
Some states provide different payment plans, including month-to-month, bi-annual, or even yearly plans. Each situation is a bit different. If you have a yearly payment plan, you should think about how you can earn a yield on that money safely to ensure you're ready when the time comes to pay taxes.
If you make monthly payments like most people, keeping it in cash in a savings or checking account is fine. Outlet would also make sense to use due to you not losing your principal and earning a much higher interest rate. The quicker you need your money, the less you can expose yourself to principal risk.
When you set aside your money for an investment, you are likely thinking long-term. The longer you set your money aside for an investment, the more likely you are to make money. When you keep this in mind, you can introduce principal risk into the money you set aside.
As the saying goes, cash is king, and people don't want to watch their money dwindle away due to the risk of the market.
There are several apps to set aside money for investing. The apps listed above are all excellent choices for people looking to set aside their money for an investment. However, some of the best apps to set aside money for a special purpose are investment vehicles of some type.
Big life events like traveling can sometimes come with a heavy bill. Luckily, there are apps specifically designed to allow you to set aside for a special purpose like this. One of the most critical aspects of setting aside money for such an event is the timeline for doing so. Your timeline and approach toward your savings goal can get you there in different ways.
For example, if you are saving for a vacation, you can put the entire thing into Outlet and watch it grow, or you can save gradually in your savings account or other savings app. It's all up to you and how you want to go about and earn your yield.
Setting aside money is both as simple and complex as you make it. The sooner you get started, the sooner saving money will become second nature, and setting aside money will be easy.
Setting aside your money for a specific purpose is important. When you set your money aside, it's essential to think about why you are doing so. This answer can drastically change the problem you are trying to solve. For example, setting aside money for a vacation in 6 months is much different than setting aside money for retirement. One requires you to have cash soon, the other only after a few decades. Therefore, your approach can vary greatly depending on your goal and time horizon.
Depending on what you are saving your money for can drastically change the product you end up using.