The 3 Smartest Places to Put Your Savings Once You Have an Emergency Fund

When you start saving money, building up an emergency fund is usually the best thing to do first. Having three to six months of living expenses set aside can save you from most serious financial disasters. This money needs to be accessible so you can access it at any time. Ideally, it should be in a high-yield savings account so you can withdraw it when you need it.

But what about after you have your emergency fund saved? Where should your money be then? There's actually not one right answer to this question since it depends on your goals for the funds -- but a high-yield savings account, certificate of deposit, or brokerage account are all possibilities.

Here's what you need to know to help you decide which of these accounts is right for you.

1. A high-yield savings account

Your emergency fund is not the only money that belongs in a high-yield savings account. If you have money you're saving for other purchases and you don't know when you'll need the cash, these funds also belong in this type of account.

High-yield savings accounts pay a competitive rate of interest (accounts on our list offer APYs as high as 5.32% as of mid-February 2024). By choosing an institution that is backed by the FDIC or NCUA, your money is insured up to $250,000 so it's safe. And you can access the money whenever you need or want it so you don't have to worry about it being tied up. (Note that some savings accounts do impose monthly limits on the number of withdrawals you make, however.)

There are lots of things you might save for and need the money accessible at any given moment -- such as a home repair fund or a car repair fund or even a vacation fund if you don't know exactly when you'll book a trip. All of this money should be in a high-yield savings account so it's there when you need it.

2. A CD

A certificate of deposit is another great place to put your savings after you've got an emergency fund. CDs offer two big advantages over a high-yield savings account. Number one, the interest rates offered are usually a little higher on CDs than on savings accounts. And number two, the rate is guaranteed for the duration of the CD term, not variable like with a savings account. So if interest rates fall, you'll still keep your high rate that was in effect when you bought the CD.

There's a downside, though. You have to tie up your money. You have to commit to leave it invested for the duration of the CD term, which is commonly between three months and five years. And there are financial penalties, called early withdrawal penalties, if you try to take money out early.

So, a CD can be a great place to keep savings if you know absolutely for sure you aren't going to need the money for a while. If, for example, you're saving to buy a house in three years or throwing a wedding in six months, a 3-year or 6-month CD could be a great place for that cash.

3. A brokerage account

Finally, if you are saving for long-term goals, you should consider putting that money into a brokerage account. Brokerage accounts allow you to invest your money so you can earn a much higher rate of return. The S&P 500, for example, has averaged around a 10% annual return over the long term.

Now, the big downside is you could lose money -- especially if you have a short investing timeline and can't afford to wait out a market downturn if you happen to buy right before a crash. So, you'll only want to put money into an investment account if you definitely aren't going to need it for a period of several years. If you're saving for a second home you want to buy 10 years from now, for example, or for retirement, this might be a good place for those savings.

Each of these accounts can be a great place for extra money after you've got your emergency account fully funded. Just be sure to consider the goals you have for the savings, so you can find the account that makes the most sense based on your timeline.