4 Things You Must Do When Your Savings Reaches $10K, $20K and Beyond

woman placing $100 in a glass jar
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When it comes to savings goals, many financial advisors recommend first focusing on building an emergency fund — usually three to six months’ worth of living expenses. But what’s next after you reach that goal with $10,000 or even $20,000 in your account? GOBankingRates interviewed financial experts to uncover which steps people should take after hitting this savings milestone.

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Start Paying Off Debt

People should look at their finances as a long journey with a series of landmarks along the way, said Richard Barrington, a financial analyst for Credit Sesame. Once you reach your first landmark — such as having $10,000 in savings — it’s time to tackle any existing debts.

“If you have any debt, especially high-interest debt like a credit card balance, using your savings to pay that off is a good next move,” he said.

Earmark Your Savings for Different Goals

Once you’ve paid off your debt — or if you haven’t gone into debt — you can work on other major savings goals, Barrington said. Depending on your lifestyle plans, that may include a down payment for a house, a car, a vacation, college tuition for your kids or retirement.

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“As your savings build, you should be able to split the money up to earmark it for different things,” he said. “This way, you can make sure to start working on very long-term goals like saving for retirement earlier.” 

Check if your bank allows you to open multiple sub-accounts, which can make it easier to separate your savings among individual goals. Or you can keep your savings in one account and maintain a spreadsheet that shows how much money belongs to each goal.

Meeting with a financial advisor can make the savings process more efficient, said Colleen Carcone, director of wealth planning strategies at TIAA. Not only can an advisor help you identify how much you need to save to meet your goals, but they can also help you create an action plan to achieve them.

“A financial advisor can also help you develop a savings and investment strategy and determine which types of accounts will help meet your objectives,” she said.

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Start Investing In Tax-Advantaged Accounts

If you follow Carcone’s advice and hire a financial advisor, they may recommend putting at least a portion of your savings into tax-advantaged accounts. There are many different kinds of tax-advantaged accounts to choose from, such as an employer-sponsored 401(k) or 403(b).

“Many employers will provide a match on a certain percentage of your salary, often between 3% and 5%, which is contributed to the savings plan,” Carcone explained. “For example, your employer may match the first 3% of your salary that you contribute to your employer-sponsored 403(b) or 401(k) plan. The employer contribution will boost your savings.”

Carcone also recommends Roth IRAs, which allow you to invest money you’ve already paid taxes on. Those contributions grow tax-free and, later on in retirement, you don’t have to pay taxes on withdrawals from that account.

She hedged this advice with one caveat: “But there are limits on the amount you can contribute to both traditional and Roth retirement savings plans.”

That’s where annuities can be a helpful addition, she added. With annuities, you invest after-tax dollars, which then grow tax-deferred. When you take distributions from an annuity in retirement, the growth — but not the principal — is taxed as ordinary income. Since retirement income is usually lower than when you’re working, you may pay less in taxes on that money.

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Lastly, if you’re saving for a loved one’s education, a 529 may be a helpful option.

“A 529 plan will allow your contributions to grow income tax-deferred, and distributions for qualified educational expenses will be tax-free,” Carcone said.

Avoid the Temptation To Splurge or Touch Your Emergency Fund

If you haven’t had to touch your emergency fund for several months or years, you may wonder if you should spend part of it on something nice for you or your family. But Barrington warns against doing this.

“Don’t let that $10,000 tempt you to splurge,” he said. “When people accumulate that much money for the first time, it’s natural to want to spend it on something. Remember, though, that you reached that goal by being disciplined. Keep up the good work, and you can start building long-term wealth instead of just paying for short-term spending.”

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About the Author

Jenny Rose Spaudo is content strategist and copywriter specializing in personal and business finance, investing, real estate, and PropTech. Her clients include Edward Jones, Flyhomes, PropStream, and Real Estate Accounting Co. As a journalist, her work has appeared in Business Insider, GOBankingRatesMovieguide®, and various smaller publications. She’s also ghostwritten a book and hundreds of articles for CEOs and thought leaders. Before going freelance, Jenny Rose was the online news director for Charisma Media, where she oversaw three online magazines, hosted a daily news podcast, and managed the editorial content for the company’s robust podcast network. In 2014, she graduated summa cum laude from Stetson University with bachelor’s degrees in Communication & Media Studies and Spanish. During her college career, she won two awards for her research and was named “Top Senior” in both her majors. Find her at jennyrosespaudo.com and connect with her on LinkedIn.
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