Emergency Fund — This account is where you put money aside for, as you might have guessed, emergencies--unexpected expenses like medical, home repairs, appliance replacement, vehicle repair, or loss of a job. An emergency fund allows you to prepare for often costly, unexpected events withouthaving to take out a high-interest loan or max out your credit cards. If you already have sizable debt, an emergency fund can keep you from sinking further in.  

But how much is enough to put in this account? As the cost-of-living rises, it can be more difficult to save, but you can always start small (something is always better than nothing). By putting away even $40 every two weeks, you’ll have saved more than $500 in just six months. Your ultimate goal should be to have three to six months of living expenses saved. Since emergencies usually come out of the blue, you’ll need to be able to access this money quickly, so you don’t want it tied up in a long-term investment fund that you can’t touch. Also, you should keep it in a separate bank account (than your “regular” savings account) so you almost forget that it’s even there. The preferred solution is a high-yield savings account--you’ll earn a higher rate of interest, but still have access to your money when and if you need it.  

Retirement Account — In the not-so-distant past, people often spent the majority of their working years at one job that offered a retirement plan or pension. Those jobs are nearly nonexistent today, and why you need to save for your own retirement. There are a variety of options like formal retirement plans, incentives offered through your employer, and personal savings.  

A lot of employers offer some type of “400” plan as part of a benefits package, whether it be a 401(k), 403(b) or 457(b). They’re all different, but usually all you need to do is contribute a portion of your paycheck and your employer will match it. If you’ve already maxed out your plan or your employer doesn’t offer one, you can always contribute to an individual retirement account (IRA), the most common type of retirement plan. An IRA is easy to set up at a bank or brokerage fund, and there’s lots to learn about the 7 type of IRAs — Traditional, Roth, SEP, Nondeductible, Spousal, Simple and Self-Directed. (This is easier than having 7 options might suggest.) Remember, this is also one of those accounts that you can automate...set it and forget it...and rest easy knowing that your money will grow and be there when you need it. 

Pre-Tax Savings Accounts (HSA) — According to the National Library of Medicine, nearly 40% of all bankruptcies are due to medical expenses. (That percentage represents approximately 500,000 Americans.) A health savings account (HSA) can offer relief to those with high medical bills. Only people with qualifying high-deductible plans are eligible, and the great thing is that contributions to an HSA are tax-deductible and tax free, including withdrawals for medical expenses.  

Often, depending on the deductible plan, your employer might have an automatic payroll deduction where a portion of your paycheck goes directly into your HSA, tax-free. If your employer doesn’t offer this feature, you can contribute directly to an HSA and claim a tax deduction. Funds are easy to access from an HSA as well--generally, they’re held in an account accessible by a debit card to pay medical bills that are eligible under your plan.  

Long-Term Savings Accounts/High Yield — Just as the name implies, this type of account earns a higher rate of interest, and holders can earn up to 0.40% annual percentage yield (APY) compared to the national average of only 0.06% APY. While you won’t get rich with this type of account, you could possibly earn about $40/year on a $10,000 savings balance.  

The best long-term savings accounts offer high rates and low service charges. Some banking institutions charge for just having an account, while some waive those fees based on maintaining a minimum balance. Most offer online banking, websites, and apps, like a regular checking or savings account, so you can access your information 24/7. A drawback of a long-term saving account can actually be qualifying for one--if you’ve had issues with your previous banking history, you may be considered too high of a risk for a long-term savings account and might not be approved. Unpaid bank fees and bounced checks may also disqualify an applicant for this type of account.  

Short-Term Sinking Fund/Revolving Savings Accounts — Unlike an emergency for unexpected purchases, a short term sinking fund focuses on planning for an expense in the near future that you know you’ll have to pay, such as HOA fees, holiday gifts, a vacation, or new furniture. Since these are usually sizable purchases, it may be difficult/undesirable to pull that much from a regular savings account, put on a credit card, or take from your emergency account.  

With sinking fund accounts, you pick an expected deadline when you know you will need to make this sizable purchase, then figure out a savings plan based on when that will occur. If your family vacation usually costs $3,000 and you have 6 months until you travel, you would need to save approximately $230 every two weeks. While that may seem like a lot to put aside, it can be easier to handle than trying to come up with a 3k lump sum just before you depart. The good things about sinking funds are that basically anyone can plan for expected future costs, and sinking funds can help establish healthy saving habits.