Dear financially clueless new grad,

Welcome to Part 2 of this guide. Read Part 1 (Budgeting) here.

This segment focuses on

SAVING!!!

(Psst… This is the 1st part of a 3-part series: 1 – Budgeting; 2 – Saving; 3 – Investing).

Determine how much you want or need to save, and invest the rest.

They say it’s good to accumulate your savings in 3 areas:

1. Emergency funds: in the event of yours or a loved ones’ sudden alteration in health
2. Contingency plans: A stash that can let you live for the next 6 months (in the event that you lose your steady income and need to find a job in 6 months).
3. Retirement savings (more on this later)

*Optional: For something you’re saving up for (house, car, travels, that long-coveted date you’ve been meaning to ask your crush on)

After the above, you may want to save for other things, but I suggest pouring a chunk to investments.

Save stagnant funds in an online savings account.

APY, or annual percentage yield, is a percentage rate showing the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period. You want higher APY rates to basically earn “free money” by nature of the money just existing in that account.

Bank of America’s Regular Savings Account has an APY of 0.03%. High-yield online savings accounts, however have APY rates of > 1%, because they do not have brick and mortar (and associated employee) costs. I use CIT Bank, but Ally Bank is a good option, too.

Save for retirement.

It is not AT ALL too early to start accumulating wealth for retirement. In fact, I wish I had started saving my Christmas money sooner. Why? Compounding. Compounding. Compounding. The ability to generating earnings from past earnings.

For example: