For those that haven’t heard of the Hierarchy of Investment Savings, it is merely an outline of where you should place your money and in what order to maximize the return on your savings.
There is no better time to start saving, if you haven’t already, than right now! For each month that passes, you run the risk of losing serious money on your investments and savings. The solution is to create a simple plan of action and get started straight away.
The Top Three Levels of Hierarchy Investment Savings
#1 Your Emergency Cash Savings
This is your emergency cash amount that you should ideally hold in a money market account or other liquid investments. It should be enough to cover you for around three months to half a year of fixed expenses when you find yourself in real need, for example, if you lose your job unexpectedly or you incur unplanned medical costs.
#2 Your Short-Term Cash
The next level is short-term cash that should ideally cover a period of around one to three years of expected expenses. This cash is not emergency savings, but instead cash which can be used for significant preplanned costs you expect to pay out for in the next year or two.
Examples here could include a deposit on a property or maybe even a whole new roof on your current home! The idea is to use this cash and not the emergency cash fund as you know such an event like this is planned ahead of time.
#3 Your Taxable Investments
Once you have allocated the above and have any spare money to save, look at placing it into a proper brokerage account. Regardless of what route you choose, whether managing this money yourself or accessing the services of someone else, ideally this money is best placed in a suitable portfolio which will earn you the best levels of interest.