4 Expensive Savings Blunders to Avoid at All Costs

Anything worth doing is worth doing right, and this includes saving money for future goals or a rainy day. Here are four ways you can go wrong with saving money -- and what to do instead.

1. Saving aimlessly

While I'm the first to admit that having actual money in savings feels pretty darn great, approaching saving without any kind of goal in mind can be a mistake. If you're just aimlessly chucking money into a savings account without any rhyme or reason, it might be a lot harder to stick to it and stay organized.

To use myself as an example, I've spent the last 15 months saving money to buy a home in 2024. I decided how much I wanted to save in total at the beginning of the process, and I divided that number by how many weeks I had to achieve the goal, which gave me a weekly target. Then, I followed through and managed to put aside that much money nearly every week -- and I've continued to save beyond my original goal (because buying and owning a house is going to be expensive).

If I had decided I wanted to become a homeowner but not actually set any kind of savings goal, it would have been much more difficult to reach this point. To avoid making things harder for yourself, figure out what you're saving for, as well as how much you want to save.

2. Going without emergency savings

One of those savings goals you should absolutely set is building an emergency fund. I lived without emergency savings until extremely recently, and let me tell you -- it was no fun. Experts recommend aiming for enough money to cover three to six months' worth of bills, but any amount of money you can put aside for a rainy day can be a help.

The alternative is the one I lived with -- going into debt every time a surprise bill came up, and then paying interest on it. Automating your savings contributions can help you build an emergency fund. If the money goes from your checking account to your savings with no effort needed by you (other than setting up the initial transfer), you can't accidentally forget to move it.

3. Using the wrong savings account

Not all savings accounts are created equal. Personally, I have two these days -- one with a big national bank that pays just 0.01% APY (annual percentage yield, or how much you can earn in a year of interest) and one with an online-only bank that pays 4.35% APY. Can you guess which one holds the bulk of my savings and which one I keep funded just enough to avoid bank fees and serve as overdraft protection for my linked checked account?

According to the FDIC, the average APY on a savings account is currently just 0.47%. Hop on over to our list of the best high-yield savings accounts, and you'll see rates 10 times that or more. So if your savings is languishing in a low APY account, make the switch. Note that savings account rates are variable, and we're currently in a high-interest-rate environment. When the Fed cuts the benchmark rate (likely to happen this year), APYs will likely fall. So it pays to enjoy those higher APYs while you can.

4. Not considering CDs or MMAs

Finally, just assuming that a savings account is perfect for all situations is also a blunder. You have a few options for bank accounts that earn interest, and it's worth exploring all of them.

A certificate of deposit (CD) lets you lock in your APY for a set period (most commonly, three months to five years). In exchange, you'll have to leave the money alone -- withdrawing it before your term is up will mean losing some of the interest you've earned.

A money market account (MMA) earns a similar variable APY to a high-yield savings account, but you'll get some features of checking accounts, such as a debit card or the ability to write checks. If you need ready access to your savings, this type of account might be right for you.

Saving money is one of the best things you can do for yourself (especially if you're building an emergency fund), but it's important to approach it the right way -- with goals and using the best account for your needs.