Having savings tucked away in a bank account is the ultimate peace-of-mind financial move. It’s how you handle an unexpected expense without having to resort to putting it on a credit card that then charges you 16% or more interest when you can’t pay off the balance in full.

Yet according to a recent federal report, 40% of U.S. households don’t have enough cash to cover a $400 unexpected expense.

And $400 is not near enough. A solid rule of thumb is to have at least three months of living expenses set aside in an “emergency” savings account. The even safer move is to aim for a six-month savings fund so you will have a more robust Plan B in the event you are laid off in an economic recession, or you run into an illness that reduces your income, and increases your medical costs.

Here’s how to maximize your savings:

Make savings a priority. Good intentions don’t work. Without a plan for saving, you will likely keep finding that you don’t have any extra cash to save. This is where a budget is super helpful. Making saving a part of your budget strategy is the first step.

Once you commit to savings as a priority it become easier to find opportunities in your budget to trim your spending, so you have some (more) money to save.

Keep savings separate. To make sure you don’t raid your savings, and to stay committed to building a solid savings stash, keep this money separate from your regular checking.

Save Automatically. Remove yourself—and your rationalizations for not saving this week, or this month  —  from the equation by setting up an ongoing auto-saving system that moves money every month to a separate savings account. This service is free.

Use online savings banks. There is no rule that says you must keep your savings account where you do your checking. In fact, if your checking account is with an old-school brick and mortar bank you definitely don’t want to use it for your savings. Traditional banks pay barely any interest on savings accounts; in early 2019, a quick web search for “high yielding savings accounts” will direct you to plenty of online banks that pay 2% or more interest.

And no worries: online banks are just as solid as the old-school banks. You can double check by looking for the FDIC icon on an online bank’s homepage. That’s the bat signal that in the highly unlikely event anything happens to the bank, the federal government will step in and cover every penny of a bank account, up to $250,000. (If you have your own account and a joint account, both are each insured for up to $250,000. There are other types of accounts that can also be covered for up to a $250,00 maximum.) 

Consider Certificates of Deposit (CDs) for longer-term savings. A bank CD is for a set period of time:  1 year, 2 years, 5 years.  With a bank CD you can often earn a higher interest rate than on a standard savings account; the longer the CD term, the more interest you  earn.  The tradeoff is that you will pay a penalty – a few months’ worth of interest – if you decide you want to cash out before the CD “term” is over.  For your basic emergency savings you want to stick with a savings account. But if you have other savings goals – such as the down payment for the next car in a few years, or a home down payment – a CD will earn you more interest. Again, search for “online high yield CDs” and you will find deals that are far better than what a traditional bank offers.

Save future Bonuses, Raises, Tax Refunds etc. It seems to be human nature that when our income increases we quickly find ways to spend it before we even think of saving it.

The trick is to commit right here, right now that every time you come into more money you will devote at least X percent to savings. The X is your call. If you are busy paying down credit card debt or student loans, you obviously want to make those a priority for extra payments as well. But getting in the habit of earmarking 15% or 20% of your after-tax bonus/raise/refund for saving will help you build security and reach your financial goals all the faster.