Yahoo Finance 7 Things You Should Do If You Deposit $5K Into Your Savings Account Monthly
Building up a sizable nest egg is an admirable thing, especially once you’re able to save more than $5,000 each month.
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But once you hit that milestone, experts recommend taking some different steps to ensure you keep growing your wealth.
“First off, pat yourself on the back on being able to save $5k per month,” said Edward Paoletti, owner of Fliptroniks.
“This is a lofty amount the average person would be jealous of. Most have a hard time saving a couple thousand dollars a month so you’re way ahead of the game.”
Nonetheless, he says that if you’re not putting that money to work and just dumping it into a savings account, you’re not doing it right. Below are the top things you should definitely do if you routinely deposit over $5,000 into your savings account.
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Make Sure Your Money Is Safe and Insured
Syed Lateef, CEO and business coach of SyedBNB, notes that with regular deposits of $5,000, your balance can grow quickly. It’s vital to know that your funds are safe up to the insured limit, which is typically $250,000.
Lateef continued, “Although this insurance doesn’t cover issues like fraud or theft, knowing that your bank offers this level of protection provides peace of mind that your money is secure against institutional risks.”
As your savings grow, this assurance becomes increasingly important to safeguard your financial future. Lateef recommends verifying your bank is FDIC-insured for increased financial security.
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Check for Potential Fees and Deposit Limits
Checking for deposit limits and potential fees when putting thousands into a savings account is important, since banks often have specific rules about deposit amounts, and exceeding these limits can lead to complications, according to Lateef.
“Usually, a regular $5,000 deposit does not trigger any alarm or significant changes with your bank,” he said, “but being aware of these potential costs helps in financial planning and ensures that your deposit process is smooth.”
For example, he says large deposits, especially those over $10,000, can sometimes trigger financial reporting requirements for the bank.
Make a Financial Plan by Asking These Questions
Lauren Zangardi Haynes, CFP and owner of Spark Financial Advisors, explains that one of your best bets for continually putting your money to work is to get a solid financial plan in place.
“A fee-only financial planner can help you make decisions about what’s the highest and best use of your free cash flow in light of your lifestyle and vision for your life,” said Haynes.
To determine the best financial plan you can make, she suggests asking yourself the following questions:
Are you maxing any tax preferred savings you qualify for? (401(k), HSA, Backdoor Roth IRA are all examples).
Do you have 6 months of living expenses already in cash? If you’re not saving for a specific goal, then opening a brokerage account to start building your portfolio could be a prudent choice.
Do you have the right kind of insurance coverages? Not just whole life insurance, but rather are your home, auto and umbrella policies up to snuff? Do you need disability insurance? Term life insurance?
Do you have kids you want to help with college? Funding a 529 can be an excellent option.
Do you have estate documents drafted? Do your family a favor and get a good set of estate documents in place.
Open a High-Yield Savings Account
According to Jake Hill, CEO of DebtHammer Consolidation, if you routinely deposit over $5,000 into your savings account, it’s time to think about opening a high-yield account.
Hill said, “High-yield savings accounts are significantly more beneficial due to their high interest rate, and those with sizable savings are well-positioned to capitalize on these rates.”
While many high-yield savings accounts have minimum deposit limits, $5,000 per month is more than enough to meet this requirement for most banks.
Avoid Lifestyle Creep
“When you’re bringing in $5,000 monthly savings, it’s easy to fall victim to lifestyle inflation,” warned Lateef.
For example, he says you might start spending more on daily lunches or opt for pricier household items.
“Maybe you get a pet that requires costly grooming,” added Lateef. “Suddenly, you find your bank account balance lower mid-month than it was before your pay increase, without any real financial improvement.”
In fact, you could be worse off. Lateef said, “Lifestyle creep means earning more doesn’t always equal better financial stability or a significantly improved life. Be intentional with your spending for better financial outcomes.”
Start Diversifying Your Savings
This might seem daunting initially, but experts say it’s an effective way to maximize your money.
Beyond a basic savings account, Lateef suggests looking into options with higher yields like certificates of deposit (CDs) or low-risk investment platforms. This approach allows your money to grow more efficiently.
Other experts recommend diversifying by buying index funds. “An index fund is basically a basket of stocks in the stock market,” Paoletti explained.
He says the average return on them can be anywhere from 3%-10% yearly depending on the fund you put your money into.
“These are considered low risk because they mainly stick with the entire market which historically has gone up over time.”
Celebrate Your Achievement
“Hitting a point where you can stash away $5,000 each month in savings is a big deal!” said Lateef. “This amount offers a level of security many only dream of.”
He emphasizes that reaching this stage requires discipline, dedication and determination, so you should treat it as the triumph it is.
“You’ve hit a significant milestone and deserve to celebrate. Maybe go out for a meal, take a day off or enjoy a movie.”
According to him, it’s all about staying motivated for your next savings goal. “Just make sure any celebration fits within your broader financial plans and goals.”
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