Savings

Your complete guide to building smart savings habits

Person talking on phone by window.

Whether you’re saving for emergencies, short- and long-term goals, or preparing for retirement, this guide walks you through the basics so you can build smart saving habits that support your financial future.

Why savings matter

Whether you’re a student, a working professional, supporting someone you love, or enjoying retirement, saving money can help you feel more confident and in control, no matter what life has in store.  No matter where you are in your savings journey, it's important to be prepared for both expected and unexpected expenses. With years of experience supporting savers across every stage of life, we know how important it is to be ready for whatever comes next. Your savings can help you prepare for:

  • Emergency expenses like car repairs, medical bills, or last-minute travel
  • Life transitions like moving, changing jobs, going back to school, or shifting into retirement
  • Planned purchases like a vacation, new tech, or a major home expense
  • Education costs not covered by financial aid or student loans
  • Income changes like freelancing, job gaps, or variable pay cycles
  • Retirement and long-term goals, from covering everyday expenses and healthcare to enjoying travel and hobbies

How to start saving

Confident young adult walking to job in the city.

Know what you’re saving for

The first step to saving is figuring out what you're saving for. Whether it's building an emergency fund, planning a vacation, saving for education costs, or preparing for retirement, having a goal gives your money a purpose and can make it easier to stay motivated.

Next, consider your timeline. Some goals are right around the corner, while others may be years away. Knowing when you'll need the money can help you choose the right savings approach and set realistic expectations for reaching your goal.

Goals you can save for

Before choosing a savings account, it's helpful to understand what you're saving for. Different goals often require different approaches.

For example, the money you'll need for a vacation next year should be saved differently than money you are setting aside for retirement that's decades away. Matching your savings strategy to your goal can help you stay organized and make steady progress.

Your goal
Suggested timeline
Emergency fund
3-6 months and ongoing
Vacation
6-18 months
Home repairs or new car
1-5 years
Education costs
Variable
Retirement
Long-term
Person happily petting dog in the bedroom.

Building an emergency fund

One of the most important savings goals is creating an emergency fund. Unexpected expenses can happen at any time, whether it's a medical bill, car repair, pet expense, or temporary loss of income. The purpose of an emergency fund isn't to make money—it's to provide peace of mind and financial stability.

We recommend:

  • Starting with a goal of $500-$1,000
    Even a modest emergency fund can help cover unexpected expenses when life throws a surprise your way.
  • Working toward 3-6 months of essential expenses
    As your savings grow, aim to build a cushion that could help cover essentials like housing, groceries, utilities, and transportation during a financial setback.
  • Adjusting based on your income stability and personal circumstances
    Your ideal emergency fund depends on factors like your income, monthly expenses, dependents, and job stability. Choose a goal that reflects your unique situation.

How to build better savings habits

Saving doesn’t have to look the same for everyone. We help people save for what matters, and there are a few simple ways to get started.

 

Start small and focus on consistency Every dollar counts. Small, consistent contributions can help build your momentum and confidence over time.
Pay yourself first Treat your savings like a bill. Pay yourself by setting money aside for your savings before you spend it on anything else.
Automate your savings Set up automatic transfers to your savings account so you're saving without thinking about it. Even small amounts can add up.
Person walking down city center street.

Understanding interest and how savings grow

Understanding savings terms like interest, APY, and compound interest can help you make smarter decisions about where to keep your money. Whether you're opening a savings account for the first time or looking for a high-yield savings account, knowing how these concepts work can help you grow your savings over time.

What is interest?

Interest is money a bank pays you for keeping money in a savings account. The amount you earn depends on factors like your account balance, interest rate, and how long your money stays in the account. The more you save, the more interest you can earn over time.

What is APY?

APY, or Annual Percentage Yield, shows how much you could earn on your savings over one year, including the effects of compound interest. When comparing savings accounts, APY is one of the most important numbers to look at because it helps you understand your potential earnings and identify accounts that offer higher returns.

What is compound interest?

Compound interest helps your savings grow faster because you earn interest on both your original deposit and the interest you've already earned. Over time, compounding can significantly increase your savings, especially when you make regular deposits and leave your money in a high-yield savings account.

Where should you save your money?

Here are the major savings account types available and how they work.

Traditional savings account

What is this account?
A traditional savings account is designed to help you set money aside, earn interest, and keep your savings easily accessible when you need it. It’s a dependable place to save for everyday goals, an emergency fund, or short-term needs.

How does it work?
You deposit money into your account and can add to it over time, either manually or through automatic transfers from your external funding source. Your balance earns interest, helping you earn money on top of your savings.

Happy person in front of colorful backdrop.

What are the benefits?

  • Earn interest on your savings while keeping your money accessible
  • Simple, easy-to-use option with no complex setup
  • FDIC insurance up to the legal coverage limit for peace of mind
  • Flexibility to save at your own pace and for any goal 

Who is this good for?

A traditional savings account can be a great fit for anyone who wants a simple way to save and earn interest over time.

  • Students and first-time savers building a financial foundation
  • Anyone starting or maintaining an emergency fund
  • Savers who want flexibility, with money available as needed
  • People working toward every day or short-term goals
  • Anyone looking for a simple, low-effort way to grow their savings
  • Savers prioritizing stability and easy access for retirement-related expenses

High-yield savings account

What is this account?
A high-yield savings account helps your money grow faster than a traditional savings account, while keeping it easily accessible whenever you need it. These accounts are often used for emergency funds, short- to mid-term goals like travel or home updates, or simply making the most of your savings while earning more.

How does it work?
When you put money into the account, the bank pays you interest (extra money) automatically just for having money in the account. The interest adds up over time, growing your balance without you having to do anything.

Person walking down raised walkway with phone.

What are the benefits?

  • Competitive interest rate compared to traditional savings accounts
  • Easy access to your money when life happens
  • FDIC insurance up to the legal coverage limit for peace of mind
  • Convenient access to your savings when you need it

Who is this good for?

This is a great fit for anyone looking to grow their savings with flexibility.

  • Students and first-time savers building a cushion for school expenses while learning strong saving habits
  • Anyone starting or rebuilding an emergency fund
  • Savers who want flexibility, with money accessible whenever they need it
  • Everyday savers looking to earn more with less effort, while staying motivated by tracking their progress
  • Those who want flexible growth for retirement funds they may want access to

Money market account

What is this account?
A money market account is a savings account that combines a competitive interest rate with easy access to your cash, often including features like check writing or debit card access. These are used for planned expenses, ongoing household needs, or added flexibility alongside other savings accounts.

How does it work?
You put money into the account to earn interest over time at a higher rate than a traditional savings account. You’ve got the flexibility to move your money when you need to, and you can access your money through electronic transfers or checks.

Relaxed young adult walking down steps and looking at the city.

What are the benefits?

  • Competitive interest rate compared to traditional savings accounts
  • Easy access to your money when life happens
  • FDIC insurance up to the legal coverage limit for peace of mind
  • Check-writing access

Who is this good for?

A money market account works well for savers who want higher saving potential with flexibility.

  • Students saving for upcoming expenses, like tuition or moving costs
  • Savers who maintain a larger balance
  • People saving for near term goals but still want access
  • Those who want more earning power than a traditional savings account
  • Anyone who values flexibility without fully locking funds away
  • Savers looking to grow retirement savings while keeping limited access to their funds

Certificate of deposit

What is this account?
A certificate of deposit (CD) lets you grow your savings at a fixed interest rate over a set period of time that you choose. Your rate stays the same the whole time, so you know exactly what to expect. Since your funds are locked in until that time period ends, CDs are often used to save for future plans.

How does it work?
You pick a term length. At Sallie Mae, CD terms range from 6 to 60 months, allowing you to lock in a fixed interest rate for that time period. Your money will stay in the account until the term ends, earning a guaranteed return that entire time. Once the account matures, you can withdraw your funds or reinvest them into a new CD.

Casual and relaxed graduate student smiling at office desk.

What are the benefits?

  • Competitive interest rate compared to traditional savings accounts
  • Fixed interest rates for predictable, steady growth
  • Multiple term options to choose from to match your goals
  • FDIC insurance up to the legal coverage limit for peace of mind

Who is this good for?

A CD is an ideal option for savers who are planning ahead and don’t need quick access to their savings.

  • Students saving for milestones, like graduation, relocation, or a new job
  • Savers setting money aside for longer term goals and retirement
  • People who won’t need their savings right away
  • Those who prefer predictability and consistency
  • Anyone comfortable setting their money aside for a set period of time 

Goal-based savings accounts

What is this account?
A goal-based savings account is designed to help you save with purpose. Whether you're building a college fund, planning a move, saving for a big purchase, or working toward another financial goal, a goal-based savings account gives you a dedicated place to set money aside and watch it grow.

How does it work?
 You choose a savings goal and add money to your account over time. Your balance earns interest at a competitive rate, helping your savings grow faster than they might in a traditional savings account. Plus, your money isn't locked away—you can access it when you need it through electronic transfers or checks.

New homeowners standing in front of new house.

What are the benefits?

  • Earn a competitive interest rate while working toward your goals
  • Stay focused by saving for specific priorities
  • FDIC insurance up to the legal coverage limit for peace of mind
  • Easy access to your money whenever you need it

Who is this good for?

A goal-based savings account is a great fit for savers who want a clear goal and a simple way to make progress toward it.

  • Students saving for tuition, books, or other upcoming expenses
  • Savers who want to earn more than they might in a traditional savings account
  • People working toward short- or medium-term financial goals
  • Anyone who likes organizing their savings around specific goals
  • Individuals building savings habits for future milestones, big or small

Match your goals to the right savings accounts

The best way to save depends on your goal. Short‑term goals call for flexibility, while longer‑term goals may benefit from consistency and steady growth.

Many people use more than one type of savings account at the same time for different goals. Since life doesn’t stay the same, your savings approach doesn’t have to either. See how your savings options can work together.

Your goal
Suggested savings accounts
Emergency fund
High-yield savings
Short-term goals (1-3 years)
High-yield savings, money market, or CD (short terms under 12 months)
Long-term goals
Certificates of deposit (CDs)
Multiple or shared goals
Goal-based savings account

Savings strategies that actually work

Saving money doesn’t mean you have to give everything up. The most effective savings strategies are simple, flexible, and built to fit your real life. By focusing on habits that grow with you, you can make steady progress toward your savings goals.

Use the 50/30/20 rule
A framework like the 50/30/20 rule can help you think about where your money goes without tracking every dollar. With this rule, 50% of your budget goes toward necessities, 30% goes toward your wants, and 20% goes toward savings and debt repayment. Having a general structure can help make saving feel more manageable.

Save windfalls
Unexpected money can provide a great opportunity to boost your savings. Whether it's a tax refund, work bonus, cash gift, or rebate, consider saving a portion before spending the rest.

Increase savings after raises
When your income goes up, increasing your savings contribution can help you reach your goals faster. Even directing part of a raise toward savings can make a meaningful difference over time.

Separate savings by goal
Saving for multiple goals? Consider creating separate savings buckets for things like emergencies, travel, education, or a future purchase. Keeping goals separate can make it easier to stay organized and motivated.

Track your progress
Regularly checking in on your savings can help you stay focused and celebrate milestones along the way. Seeing your balance grow may make it easier to stick with your plan.

Review your savings quarterly
Life changes, and your savings goals may change too. Taking time every few months to review your progress and adjust your plan can help keep your savings aligned with your priorities.

Happy and confident graduate student walking outside.

Common savings mistakes to avoid

Leaving your money in a low-interest account
Keeping savings in a low-interest account can limit how much your money grows over time. Your savings could earn more competitive interest in one of our savings products.

Saving without a clear goal
Without a goal in mind, savings can feel more optional and easier to dip into. Having a purpose for your savings can make it easier to stay on track.

Forgetting to check in on your savings
Life is always changing, and your savings strategy should flex with it. Taking a look at your savings regularly can help make sure that your accounts and contributions are still on track with your goals.

Not knowing how to access your money
You may need easy access to some of your money, while other savings may be better off in longer-term accounts. Knowing how and when you can access your money can help you choose the right account to save in.

If any of these mistakes sound familiar, you’re not alone. Saving is a skill, and it’s one that you can build over time.

Putting it all together

Remember, progress matters more than perfection. Saving money isn't about how much you start with. It's about creating a strategy you can stick with over time. Small, consistent actions can add up and help you build a stronger financial foundation, one step at a time.

1

Understand why you’re saving

Know what you’re working toward and picture what you’re saving for.

2

Set clear savings goals and habits

Build a routine that sticks and turn small deposits into progress.

3

Choose the right savings account

Match your account to your goal and pick one that will help you grow.

4

Avoid common savings mistakes

Watch out for mistakes that can get your savings off course.

5

Review and adjust along the way

Celebrate progress and adapt as you go to get the most out of your savings.

Explore our savings options

footnote Deposit products are offered through Sallie Mae Bank, Member FDIC.

footnote SALLIE MAE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, SERVICES, AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK SALLIEMAE.COM FOR THE MOST UP-TO-DATE PRODUCT INFORMATION.