3 Signs You’re Ready to Invest Some of Your Money in Savings

Savings accounts are getting pretty hefty these days, so the idea of ​​keeping some extra money in the bank is pretty appealing. However, interest rates tend to go down over time. And even if today’s generous savings account interest rates remain the same for a while, the reality is that you could make a lot more money by investing it in the stock market.

Over the past 50 years, the stock market has rewarded investors with an average annual return of 10%, as measured by the performance of the S&P 500 index. By contrast, a savings account today could earn you 4.5%.

Now, let’s say you have $10,000 to work with. At a 4.5% annual rate of return over 20 years, that amount would grow to just over $24,000. But at a 10% annual return, that amount would increase to more than $67,000.

This means that when you invest money, you run the risk of losing it. And you may not have access to your money exactly when you want.

For example, let’s say the market has been down for a year. If that happens when you want to cash out some stocks to pay for a vacation, you’re pretty much out of luck.

That’s why it’s important to make sure you’re actually ready to invest. But if these signs apply to you, it may be a good time to move some of your savings into a brokerage account.

1. If you have an emergency fund for more than 6 months

You always need money in the bank because of unplanned bills. But generally speaking, if you have enough emergency funds to cover three to six months of essential expenses, you’re in a pretty good position to deal with unexpected situations, like major home repairs or losing your job.

Now, if you are the sole breadwinner of a large family and are self-employed, it may be easier to have 9 to 12 months’ worth of living expenses in your emergency fund. But beyond that point, it makes sense to invest your money.

2. No major purchases will occur in the next five years.

Maybe you want to buy a house in four years, or you expect to need a new car in the next 24 months. If so, you might not want to put your money into investing. If value falls, it may take time for your portfolio to recover. And if you’re working in five-year increments, that might not happen anytime soon.

However, if you don’t expect to make any big purchases in the next five years, it might be a good idea to invest your money. Even if the value of your portfolio falls, you will have time to recover it before any stage where you need cash.

3. You have educated yourself about investing and know where to start.

You don’t want to start your investing career throwing money into random stocks and hoping for the best. Make sure you have a reasonable idea of ​​what you are doing before investing any money.

This doesn’t mean you have to become an expert at picking stocks overnight. But you need to know some basics about what to look for in a stock, such as choosing a company that has good cash flow and can manage its debt.

if you don’t If you think you have the ability to pick individual stocks, that’s okay too. That’s because broad market index funds or exchange-traded funds (ETFs) are good options for those in your boat. But the important thing is to have an idea of ​​where you want to put your money once you move it out of your savings.

It’s wise to keep your savings account good. However, if these signs apply to you, you may be ready to start investing and generate returns that are far more impressive than what the banks are offering.

This savings account is FDIC insured and can earn 11 times the bank’s earnings.

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