In short
Whether to use a Roth IRA as a savings account; how to prioritize savings and retirement after starting a new job; choosing and using high-yield savings accounts; budgeting and emergency-fund targets; and how to handle money across multiple accounts.
Guests
No named guests. Hosts are Sean Piles and Elizabeth (NerdWallet Smart Money). A listener, Jake (33, San Francisco Bay Area), asks the main money questions.
Key claims
Buy now, pay later can be a budgeting tool if payments are planned and made on time, but it’s risky for people who can’t afford repayments. Pro-consumer bias matters amid weakened consumer protections (CFPB budget cuts; FTC click-to-cancel rollback). Roth IRAs shouldn’t be used as typical savings accounts; set boundaries. Emergency fund first, then employer match, then retirement; you can automate and contribute to emergency fund, Roth IRA, and HSA simultaneously.
Notable examples
Jake’s accounts (401k with 6% match, Roth IRA, new HSA, high-yield savings); emergency fund at ~2 months (~$10k); student loan ~100k with employer forgiveness ($400 per paycheck); car/house savings timeline (5 years vs 6–7 years) and using HYSA vs CDs/CD ladder.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOWeather Check and Hot Takes Introduction
0:34 to 0:57
Hosts discuss the weather and introduce the Hot Takes segment.
“It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.”
Weather Check and Hot Takes Introduction
1:31 to 2:25
Hosts discuss the weather and introduce the Hot Takes segment.
“Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds.”
Hot Take: Buy Now, Pay Later Loans
2:25 to 4:19
Discussion on the pros and cons of Buy Now, Pay Later loans.
“Buy now, pay later loans can be an effective budgeting tool when used responsibly.”
Debate on Financial Tools and Consumer Protection
4:19 to 6:42
Hosts debate the use of Buy Now, Pay Later and consumer protection issues.
“I will add that default rates on buy now, pay later loans are also lower than with credit cards.”
Listener Engagement and Money Questions
6:42 to 11:25
Hosts invite listeners to submit money questions and discuss upcoming segments.
“So let's see if we agree, disagree or agree to disagree.”
Listener Engagement and Money Questions
11:28 to 12:33
Hosts invite listeners to submit money questions and discuss upcoming segments.
“Does anyone else feel like August is the Sunday of summer?”
Listener Engagement and Money Questions
12:51 to 13:59
Hosts invite listeners to submit money questions and discuss upcoming segments.
“Many don't work with insurance at all, which means you're stuck paying the full cost out of pocket or paying for an expensive monthly subscription.”
Jake's Financial Wish
15:38 to 16:58
Discussion on Jake's money wish and pursuit of financial peace.
“This episode, we're talking with a listener, Jake, who lives in the San Francisco Bay Area and has some questions about managing his savings and retirement contributions.”
Navigating Savings Accounts
16:58 to 19:00
Jake shares his experience managing various savings accounts.
“generally being able to sleep at night knowing that my money is doing good things and working for me the way that it's supposed to.”
Choosing a Bank for High-Yield Savings
19:00 to 21:06
Advice on selecting a high-yield savings account and bank.
“I mean, it can be really confusing because there are so many online banks and they all seem almost the same and they all have names you've never heard of before you saw them in a roundup or something.”
Show all 18 chapters
Using Roth IRA as a Savings Vehicle
21:06 to 24:48
Discussion on the implications of using a Roth IRA for savings.
“The good news is that nobody's going to call the police on you if you change your bank.”
Prioritizing Savings and Budgeting
24:48 to 26:40
Jake asks about prioritizing savings and budgeting strategies.
“firm boundaries between what I'm doing with my Roth IRA versus my high-level savings account.”
Adjusting to a New Financial Situation
26:40 to 28:00
Jake discusses adapting his budget after a job change and relocation.
“Talk with us about how that changed your finances and how you've reallocated your budget after that.”
Understanding Budgeting Categories
28:00 to 29:14
Learn about allocating your income towards needs, wants, and savings.
“And we emphasize this because having your money in this category where half your money roughly is going towards needs, 30 % is going to wants, 20 % is going to additional debt payments and savings.”
Discussing Debt and Payments
29:15 to 30:24
Explore the impact of student loans and medical debt on financial planning.
“Jake, you mentioned that you have some debt.”
Managing Multiple Bank Accounts
30:25 to 33:00
Discover the pros and cons of managing accounts across different banks.
“So talk with us about what your questions are there.”
Balancing Savings and Investments
33:01 to 34:26
Understand how to prioritize savings for emergencies while investing.
“Do you have any other topics you wanted to talk with us about or questions for us?”
Saving for Future Goals
34:27 to 36:12
Learn about the best savings vehicles for short- to medium-term goals.
“That's another follow-up question with all of that.”
Transcript
Automatic transcript. May contain errors.0:00Elizabeth Ayoola:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most.
0:26Sean Pyles:Learn more at Accenture.com slash Spotify.
0:31Elizabeth Ayoola:This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.
0:56Sean Pyles:Elizabeth, you live in Texas, so how's the weather? Is it hot?
1:00Elizabeth Ayoola:Extremely hot, like 90 to 100 degrees hot. Like I have to turn on my AC 30 times a day hot.
1:06Sean Pyles:Yuck. Here in Portland, it is like 75 and not a cloud in the sky. So it's just the perfect temperature for me.
1:14Elizabeth Ayoola:I never thought I would say that I'm looking forward to fall, but I absolutely am. And my light bill is also looking forward to fall.
1:21Sean Pyles:Well, this episode, we're about to turn up the temperature even more with another round of Hot Takes.
1:31Sean Pyles:Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.
1:39Elizabeth Ayoola:This episode, we answer listeners' question about whether they should use an IRA as a savings account and how to manage their money after landing a new job. Congrats.
1:47Sean Pyles:But first, it's August, and I'm betting it's hot where you are. So we're going to make it even hotter. And no, I'm not talking about posting even more post-workout thirst traps on my Instagram, because I will be doing that. But we're doing another round of money hot takes where Elizabeth and I have 100 seconds each to give you our frank assessment about something in the world of finance.
2:08Elizabeth Ayoola:And, you know, I live for a good hot take and I have something I need to get off my chest.
2:12Sean Pyles:OK, well, I'm getting my timer ready, Elizabeth.
2:16Elizabeth Ayoola:Make sure your timer is not hacked, Sean.
2:18Sean Pyles:I don't think so. OK, but if you go over 100 seconds, I will be interrupting you. So just prepare for that. Ready? Yes. Three, two, one. All right.
2:28Elizabeth Ayoola:Buy now, pay later loans can be an effective budgeting tool when used responsibly. That's my hot take. I was leaning towards them being a debt trap initially, to be honest, especially with the increasing number of delinquencies around these loans. But I have switched sides. Now, for quick context, buy now, pay later loans such as Klana, Affirm, PayPal Pay and For let people spread out payments over time. And they don't require credit checks and they usually do not charge interest. So they can be super helpful for people who have limited or less than optimal credit histories. Now, some people argue that if you can't afford to pay it in one go, it's an expense that you can't afford.
3:01Elizabeth Ayoola:And that might be true. But let's be honest. Many people can't afford their lives right now. And it's not just because they're living above their means. Some people's income has not kept pace with inflation, with the increased cost of living, and they just don't have enough to pay for everyday expenses. According to FINRA's recent National Financial Capability Study, a rising number of Americans are struggling to pay basic expenses. The survey found that there was a 10 percentage point decrease in the proportion of adults saying that they find it easy to cover their expenses compared to data from three years ago.
3:31Elizabeth Ayoola:Now, for people who prefer raw numbers, the data found that 26 million more people are struggling to make ends meet than three years ago across all income bands. Said people may have emergency expenses or essentials they have to pay for, and Buy Now, Pay Later allows them to do that by spreading out payments, usually over six weeks, and not having to worry about the interest charges that they may get if they used a credit card. Now, considering the FINRA survey also found the number of people who always pay their credit cards in full each month has slipped by six percentage points compared to 2021, and credit card debt has jumped to nearly four in 10 users, Buy now, pay later can be a way to avoid that interest they might incur on those balances.
4:11Sean Pyles:Okay, that's 100 seconds. I know you're not done yet, and we'll get to the rest of it, but I am not fully convinced yet. So try to make this case for me, okay?
4:20Elizabeth Ayoola:All right, I'm driving it home. I'm driving it home. Ready, set, go. I will add that default rates on buy now, pay later loans are also lower than with credit cards. I hope that's driving it home for you, Sean. People who are not struggling financially also use buy now, pay later, although at a lower percentage. And now these loans can help them stay within their monthly budget, right? So I will say that this is only an effective budgeting tool if you actually budget and make those payments on time. Now, to do that, you need to know what you have going in and coming out every month, and you need to set boundaries around your spending.
4:51Elizabeth Ayoola:Just because your payments are spread out and deferred until later, that does not mean you'll have the money to pay the loan later if you haven't budgeted for it.
4:59Sean Pyles:Okay, that's a fair point.
5:00Elizabeth Ayoola:All right. So I'm not encouraging people who struggle with impulse spending, have a hard time budgeting, or cannot afford repayments to use it. And one more note that I'll sprinkle in is that since FICO will be including buy now, pay later loans in credit scores come fall, it can also be a way to help positively impact your credit score, assuming you aren't taking out too many loans and are paying them back on time.
5:23Sean Pyles:All right. So I am still not 100 % convinced that buy now, pay later loans are a good idea, but I think that they have a place, right? Like all debt products are tools. All financial products are tools of some sort. And how you wield it really depends on the circumstances that you're going to get, the results you're going to get here. So with Buy Now, Pay Later, I think it's on people to know when their payments are due, how many loans they have, and what it's for. But if people are using these for day-to-day expenses like groceries, that speaks to bigger budgeting concerns. And folks might want to try to either reduce their expenses or increase their income so they aren't relying on debt products to cover things like their groceries.
5:58Sean Pyles:That just makes me really concerned for them.
6:00Elizabeth Ayoola:Yeah, but what happens, Sean, if people are actually budgeting, but as we know, people's incomes are just not increasing or they don't have a side hustle and they just can't afford their life, then what happens? Because sometimes people are budgeting, but the math just ain't mathing.
6:14Sean Pyles:You have to make tough calls. I'm not saying any of this is easy, but I just don't like relying on debt products like this. I understand that we don't live in an ideal world and things are expensive and these debt products are so easy to acquire, but I just worry about people slipping into a cycle of debt that they have a hard time getting out of. Fair.
6:29Elizabeth Ayoola:And I do think people who are prone to slipping into debt maybe should steer clear of the buy now pay later loans. But I still stand on my point. It can be a budgeting tool.
6:38Sean Pyles:But I'm still worried. So we can just agree to disagree on this one.
6:41Elizabeth Ayoola:I love it. Okay. Well, you're up next. So let's see if we agree, disagree or agree to disagree. All right. I'm hold on. Got to set my timer. Okay. On your mark. Get set. Hit me.
6:54Sean Pyles:Okay, my hot take is more of a coming out, something that I have plenty of experience with over the years. But my real hot take is that I'm coming out as biased. And I really think that's one of the best things that I can be right now. You know, my coverage of financial issues, the way I answer our listeners' questions, even just how I talk with people in everyday life about money, my bias is strongly in favor of what is pro-consumer, which more and more often means calling out predatory actions by corporations and political actors who are working to rip us off and strip away our consumer protections.
7:26Sean Pyles:The thing is, this bias of mine isn't new, necessarily. Growing up during the financial crisis of 2008, where I saw families lose their homes due to shady lending practices and seeing the Occupy Wall Street protests play out in college, I've witnessed how political actors and corporations have materially harmed regular people time and time again, and how consumers are often left worse off with little recourse to make things right. But why is it important right now, this bias of mine? Anti-consumer actions happen all the time, like companies making predatory financial products, scammers stricking people out of their life savings, and it happens in presidential administrations from both parties.
8:01Sean Pyles:But the actions the current administration has taken over the past six months have upended the landscape of consumer protections and how we should engage with financial products and institutions going forward. Now, I don't have time to list every single change, but here are a couple really important ones. Our main pro-consumer watchdog has been totally gutted. the budget for the Consumer Financial Protection Bureau, an organization that has returned over $21 billion to consumers since its inception.
8:25Elizabeth Ayoola:You're at time, Sean. Sorry to cut you mid-census, but you're at time. So drive the point home. All right. All right.
8:30Sean Pyles:I'm going to try to wrap this up quickly. Basically, the CFPB has had its budget and its staff slashed, which means that there are fewer resources to help keep us safe from shady financial and business practices. And also another thing that we talked about recently on a Money News segment is the rollback of the Federal Trade Commission's click-to-cancel rule around subscriptions. That means that companies can make you jump through all sorts of onerous hoops just to cancel a subscription. So that might seem like a small move, but it's indicative of a trend toward giving companies even more leeway at our expense.
8:59Elizabeth Ayoola:Well, on that note, Sean, what does this bias mean for smart money and our listeners?
9:04Sean Pyles:Well, I think more than even before, folks can expect us to call out actions that are going to make our listeners' lives more difficult or expensive or more likely that they will face shady business practices and sketchy financial products. Because ultimately, my driving force is that I want our listeners, I want the people that I talk with in my life to build the life that they want with the money that they have. And it frankly pisses me off that those with political or financial power are taking steps to make that harder for you. So I have no idea how many seconds that is. I'm sure it's like well, well over 100, but that's what I've got today.
9:36Elizabeth Ayoola:Well, you're closer to the 200 mark, but I'm going to let you slide because this is a hot take that I agree with Sean. I do not have a rebuttal because as a girl who cares deeply about social justice and wishes to see a world where everyone has access to resources they need to create financial stability, I think we have to call out any policies, practices, and systems that aren't pro-consumer.
9:57Sean Pyles:And we know this is going to be an ongoing story and a bit of a moving target. So I think that's why it's on us, Elizabeth, to really keep an ear to the ground for our listeners to make sure that people know what's going on and that we can put it into context for them because there's so much happening every single day. It can be really hard to follow.
10:12Elizabeth Ayoola:Exactly. So another reason for you, listener to subscribe, follow, and comment.
Read the full transcript
10:17Sean Pyles:Nice plug, Elizabeth.
10:20Elizabeth Ayoola:All right. We're about to get to this episode's money question where we talk about whether it's a good idea to use an IRA as a savings account. Have a hot take about that, Sean. I know you do.
10:31Sean Pyles:I absolutely do, but folks are going to have to listen to that money question segment to hear it. Okay. So before we get into this episode's money question, remind our listener to send us your money questions. Maybe you're wondering about when and how it is actually okay, at least in my opinion, to use a buy now, pay later loan, or what you should be looking out for in terms of sketchy business practices so you can stay safe in this new landscape.
10:51Elizabeth Ayoola:That's right. You can leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. And just in case you were wondering where your paycheck is going every month and you need help finding out your budget, send us a breakdown of your income and expenses using the Google form in the show description for our budget rehab series.
11:17Sean Pyles:All right, well, let's get to this episode's money question segment that's coming up next. Stay with us.
11:25Sean Pyles:Today's episode is sponsored by Quince.
11:28Elizabeth Ayoola:Does anyone else feel like August is the Sunday of summer? It's the perfect time to hit reset before the autumn rush. And for me, that always starts with my wardrobe. Quince proves you don't need a crowded closet to look incredible. You just need the right pieces.
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11:59Elizabeth Ayoola:You know, recently it's been super hot in Texas, I mean, 100 degrees. And I remember I bought a couple of months back this 100 % cotton tank top from Quince, and it's been doing wonders for the heat. And also, it washes so well. I love the quality.
12:13Sean Pyles:You know, Elizabeth, I am such a warm sleeper. We were just talking about this, how it's kind of gnarly that I wake up covered in sweat every morning. But I don't anymore now that I have this amazing linen duvet cover that I got from Quince. I am sleeping so well, so cool, and so cozy. And it's all thanks to Quince. I might have to add that to my cart next. Upgrade your everyday. Download the Quince app for exclusive offers or go to quince.com slash smart money. Get free shipping on your order and 365 day returns. Now available in Canada and the UK too. That's q-u-i-n-c-e dot com slash smart money.
12:48Sean Pyles:Today's episode is sponsored by Rula. Finding a therapist is hard enough, but finding one who actually takes your insurance, that's where most online therapy platforms fall short. Many don't work with insurance at all, which means you're stuck paying the full cost out of pocket or paying for an expensive monthly subscription.
13:04Elizabeth Ayoola:Rula does things differently. They partner with over 100 insurance plans, making the average copay just$15 per session. That's real therapy from licensed professionals at a price that actually makes sense. I mean, think about it. You use your insurance benefits to maintain your physical health. So why won't you do the same for your mental health?
13:24Sean Pyles:Rula isn't just affordable. The experience is tailored around you. Other online therapy platforms might match you with the first available provider, whether or not they're the right fit. Rula considers your goals, preferences, and background to provide you with a curated list of licensed in-network therapists who are actually aligned with what you need, because they know that finding the right therapist can make all the difference.
13:43Elizabeth Ayoola:No wait lists, no frustrating back and forth. Rula makes it easy to find a mental health provider who is accepting new patients, and appointments are available as soon as tomorrow. Plus, Rula sticks with you throughout your journey, checking in to make sure your care is helping you move forward.
13:59Sean Pyles:Go to Rula.com slash smart money to get started today. That's R-U-L-A dot com slash smart money for quality therapy that's covered by insurance.
14:07Elizabeth Ayoola:The average copay for Rula patients is$15, but depending on your benefits, your copay could be as little as$0 per session.
14:15Sean Pyles:Rula partners with a network of over 15 ,000 therapists and psychiatrists nationwide, enabling you to find your personalized solution and the right therapist for you based on your needs, preferences, and state requirements.
14:26Elizabeth Ayoola:Thousands of people are already using Rula to get affordable, high-quality therapy that's actually covered by insurance. Visit Rula.com slash smartmoney to get started.
14:36Sean Pyles:That's R-U-L-A dot com slash smartmoney. You deserve mental health care that works for you, not against your budget. Hey, it's Micah Sargent from Tech News Weekly, the show where we talk to and about the people making and breaking tech news. Amanda Silberling is here this week and we talk about Google's reports saying, don't you worry about AI costing you your job? No. Instead, according to what they've seen, AI is helping you complete your tasks. Amanda talks about Gen Z getting really into the flip phone and, well, simpler tech overall. Before we talk about OpenAI's AI breaking into Hugging Face and how both companies handled it.
15:18Sean Pyles:And then we talk about something uniting all Americans together. Well, at least for the most part, it's AI data centers, and nobody wants them built in their neighborhood. You can check out Tech News Weekly by heading to twit.tv slash TNW, or just search for Tech News Weekly wherever you get your podcasts. We're back and answering your money questions to help you make smarter financial decisions. This episode, we're talking with a listener, Jake, who lives in the San Francisco Bay Area and has some questions about managing his savings and retirement contributions. Jake, welcome to Smart Money.
15:51Sean Pyles:Thanks for having me on. Quick reminder, courtesy of our legal team, that this is not going to be individualized advice for you. It's just general information for you to make your own smart decisions. And today we're going to be covering a lot of great budgeting and saving strategies in a general sense. But if you're listening, or Jake, if you want to as well, if you'd like a specific financial strategy tailored to your needs, then you might want to consider working with a financial planner. and you can actually do that directly through NerdWallet. We'll have a link in today's show notes where you can learn more about NerdWallet Advisors and NerdWallet Wealth Partners.
16:22Sean Pyles:So just a little FYI there.
16:24Elizabeth Ayoola:All right. So Jake, I'm going to start with a little random question that just came to my mind. So I am a genie. We are halfway through the year and you get one money wish, any money wish for the second half of the year. What is it?
16:39Sean Pyles:Any money wish for the second half of the year. Yeah. I just wish for several million dollars to fall on my lap and that'd be okay.
16:48Elizabeth Ayoola:If you're going to wish for that, then you have to tell me what you're going to do with it.
16:51Sean Pyles:I think I would just really want more financial freedom and peace in all of my accounts and generally being able to sleep at night knowing that my money is doing good things and working for me the way that it's supposed to. I like the idea of financial peace. Can you think about an area of your financial life where you don't have financial peace right now? Yeah, I mean, that's partially why I'm jumping on today is just because there's so many accounts that I've heard about as far as like saving and investing, even like where to keep an emergency fund or how to start building savings for the future for either buying a house or purchasing a car or something like that down the road.
17:27Sean Pyles:And, you know, I think it's one of those things that I rack my brain about on a daily, weekly basis. And it's constantly the stress that I think about and keep researching. Well, hopefully we can provide some clarity and reassurance there. How are you currently managing your savings and investments? What kinds of accounts are you using? What kinds of accounts are maybe stressing you out a bit? Currently, I have quite a few different like savings accounts. So I have like a 401k that's managed through my current employer. So I'm taking like a 6 % match there. You just have like a standard savings and checking account.
18:00Sean Pyles:I have opened up a Roth IRA also sometime last year. And so I've been like slowly contributing a little bit to that. And then I've been looking for a high-yield savings account to also use. And then actually because of my new job out here in the Bay Area, I also have a high-deductible health plan now. So I just opened up an HSA because I figured that was a good thing to start contributing to.
18:22Elizabeth Ayoola:Look at you, Jake.
18:23Sean Pyles:So you have pretty much the full suite of accounts here.
18:25Elizabeth Ayoola:How old are you?
18:27Sean Pyles:I'm 33.
18:29Elizabeth Ayoola:You're doing a good job.
18:30Sean Pyles:Yeah, I think you have about the accounts that you would typically want to have. and where do you think you could be doing better or what's leading you to feel a little bit stressed with these accounts? Yeah, so I mean, I just moved to the Bay Area and kind of got like my first big boy, I guess almost, I'd say like job that has like a solid pay after a three-year postdoc term appointment that I had back in Colorado. So now kind of trying to figure out how to best put my money to work in this situation. So I feel like I'm doing well as far as kind of getting some of these accounts set up but i definitely could use help in how to best allocate funds to each one of the accounts as well as what i mentioned to you before was the high yield savings account um that's like one thing that i had never had but i knew that i should have most likely and i feel like i've researched and looked into so many different high yield savings accounts and it's just very stressful and like not easy to figure out which account to go for, or if I should move all of my banking to one bank and then use a high-yield savings account there, or if I can totally just have one separate high-yield savings account and a completely different credit union or something.
19:45Sean Pyles:I don't know. Yeah. I mean, it can be really confusing because there are so many online banks and they all seem almost the same and they all have names you've never heard of before you saw them in a roundup or something. And I felt similarly when I opened my first high-yield savings account many years ago at this point. And I chose one that was well rated and that my colleagues suggested to me. And, you know, I figured that at that time, if there was something wrong with the bank, or if I really didn't like working with them, I could just go to a different bank. And I haven't done that. It's been nine years at this point, and it's been okay.
20:21Sean Pyles:So in some ways, the best bank for you may just be the one that you go with and you start getting a higher yield in versus is just waiting to find the quote unquote perfect bank because no bank is perfect. It's just a place to put your money and get a good yield on it, hopefully. So you can experiment with a little bit of trying out a bank for maybe a year, see if you like it. And if you do, you can keep working with it, see how they treat you. If they treat you well, you could keep banking with them. If you find that maybe their interface is annoying or they're lowering their yield on their high-level savings account when other banks are not, at that time you could just switch over to a new bank.
20:57Sean Pyles:It's a little bit tedious to do that upfront administrative work, but it's not a huge deal. And at least that way, you know you have your money earning some interest for you versus just sitting in a traditional savings account where you get basically nothing.
21:09Elizabeth Ayoola:The good news is that nobody's going to call the police on you if you change your bank. So you get to change it, just like Sean said, if you don't like it. I will say I am such an analysis paralysis girl myself. And I think when choosing a bank, it might help if you think of the three top qualities that you want. Just like when you're dating, like what are your three top qualities and your three deal breakers? And I know for me, I care about interest because I want my money to grow. So that's probably number one for me. I went with an online high yield savings account. So for some people, that's a big deal because I can't just go to any ATM and withdraw money from that high yield savings account.
21:46Elizabeth Ayoola:Right. So you need to think about access, how easily accessible your cash is. And also a huge one is customer service. How easy is it to get through to somebody if you need help with anything, really? So I think those are three things maybe to consider. But obviously, you have your own list. But I probably wouldn't go past three things since you're already having analysis paralysis. So that might help you narrow it down, too.
22:06Sean Pyles:Thanks for that advice. And I was going to say two things, probably, based on what both of you said. One, are there any red flags maybe to look for or avoid in looking at these online-only banks? or sometimes you see like a flashy high yield offer. And so it was like, are there red flags to that? And then also to the second part, like how is the best way to avoid the analysis paralysis or to overcome that?
22:31Elizabeth Ayoola:As Sean said, I think a combination, find one and then just go for it. And again, if you don't like it, you can always switch. And then as for your question with red flags, I would say the first thing that comes to mind for me is some of these accounts have maybe high account minimum balances. So you want to look out for that. You also want to pay attention to fees. because some banks come with lots of fees and they'll lure you in with maybe a bonus or something and then you end up paying a lot in fees over time.
22:57Sean Pyles:Jake, when you wrote to us, you mentioned that you were considering maybe using your Roth IRA as a savings vehicle. Talk with us more about your thinking there. Yeah, so there was a couple different trains of thoughts. Maybe it was because I was trying to avoid opening up a high-yield savings account because I couldn't figure out where to go or how to do this and didn't want to go through the whole process of opening up a whole other bank account and managing that. But also my thought was like, well, my Roth IRA is projected to make such percentage of maybe 6 % to 10 % or something like that in interest over a period of time.
23:35Sean Pyles:And meanwhile, these high yield savings accounts only do maybe 4%. But I know that for Roth IRAs, you can typically take out anything that you contribute without penalty. You can't least take out what you put in. So my thought was like, why not use that, especially if I can't max out my Roth IRA and be contributing to a high yield savings account in maybe like a given calendar year or something.
23:59Elizabeth Ayoola:Because of compound interest, Jake, compound interest. Obviously, if you need to take it out, fine, but you're investing. So the longer that you leave your money in there, the more time it has to grow. Whereas if you put it in something like a high yield savings account that is liquid and it's not an investment account, which sometimes people think it is. You know, you can just take your money in and out and you're not losing any long term growth, if that makes sense.
24:21Sean Pyles:And this gets to what is the purpose of each account? A Roth IRA for me and for many people is a retirement account. So you want to put the money in there that you will intend to have when you retire. Sometimes people can mix up the purpose of it and have it be like a savings account because sure, you can take out your contributions at any time without a penalty. But that can become a bit of a slippery slope where you're pulling out your contributions kind of more laxly than maybe you should. So I personally like having firm boundaries between what I'm doing with my Roth IRA versus my high-level savings account.
24:54Sean Pyles:And even with my high-level savings account, I have many of them for different purposes. So I have firm boundaries between what I'm saving for. So that helps me set guardrails for myself because a lot of money management is just having the proper self-created guardrails around where your money is going and how you're using it. I'm not a big fan of using a Roth IRA as a typical savings account.
25:13Elizabeth Ayoola:Same here. All right, Jake, it sounds like earlier you had a question around maybe how to prioritize your savings. So, you know, you have all these different buckets and I think that you mentioned something about how much should I be saving in each, how much should go. So I want to ask you about your emergency fund, first of all, because at NerdWallet, we love to say that that is the first place that people should start. So do you have an emergency fund? And if so, where are you saving that money and how much you got?
25:38Sean Pyles:Right now, my emergency fund is about two months of expenses. So it's closer to maybe like 10K. And that's between basically like a checking account, you know, kind of just the savings account within that same location. And then since, you know, kind of like submitting questions and looking around, I went ahead and pulled the trigger and just got like a random high yield savings account. So great. Congrats. And so I think I have about like$2 ,000 over there as well. So about two months of expenses, maybe$10 ,000 about, and then that spread between, you know, maybe a couple of accounts.
26:18Elizabeth Ayoola:The order of financial priorities that we usually recommend would be that emergency fund first, getting the employer match if you get one, and then going back over to other retirement accounts like an IRA and so forth. So that's just a high level way that you can think about how to kind of allocate your money.
26:34Sean Pyles:You mentioned as well, Jake, that you just got your first like big kid job and you have some good money coming in. Talk with us about how that changed your finances and how you've reallocated your budget after that. I was thinking about this really ever since I graduated and got my PhD. Basically, as soon as I got this position and got moving allocation bonuses and stuff like that it was kind of like cool pay off any sort of like random personal loans that I might have been holding on to making sure that everything is more or less like paid for and then immediately contributing to kind of like an emergency fund.
27:09Sean Pyles:Most of my debts are kind of all gone. And so now it's like, how do I start putting money together to actually plan for retirement and, you know, safeguard myself in the short term, I would like to have a house someday as well. So, you know, how do I start like budgeting and putting money aside for that at the same time? How do you budget currently? Do you have a system that you use? I think it's just called like the reverse budget. So I just have money that's kind of like automatically pulled out and allocated towards multiple of these buckets. And then afterward, I kind of just plan to more or less like spend the rest throughout the month or the next several weeks.
27:45Elizabeth Ayoola:Pay yourself first. Yeah.
27:46Sean Pyles:So I pay myself first and then use the rest for my budget for the month. Well, since you just had this big change in your finances with your new job and your relocation, I would encourage you to go back to basics and really look at that 50-30-20 framework that we talk about oftentimes. And we emphasize this because having your money in this category where half your money roughly is going towards needs, 30 % is going to wants, 20 % is going to additional debt payments and savings. Given that you've moved to an expensive area, how are you covering your rent or utilities? I assume you have a car out there too because you have to drive in the Bay Area most likely.
28:19Sean Pyles:And then what are you putting towards your savings, including retirement savings too. So just get a clear understanding about that. That can help you understand whether you do have more money that you could put toward your savings or whether you should up your retirement contributions. And then you can figure out, do you have 30 % towards once or do you actually need to make that maybe closer to 20 given how expensive the Bay Area is? I've definitely tried to, but I think so far every month has kind of been so like variable and fluctuating because it's been so new. So I'm kind of waiting for things to somewhat like stabilize before I can, you know, say for sure, like what the percentages of each category kind of are.
28:59Sean Pyles:I think that's smart. Once you have a clear picture of where things land, maybe three months out, look back at the averages of how much you're spending on things like gas and rent and all of that, just to see where your money is falling. And then again, that'll help you figure out where you can put more into savings. Jake, you mentioned that you have some debt. I want to hear a little bit more about that? Really the only debt that I have now, thanks to working on this for several years and my new relocation and stuff, is kind of just like my larger student loan from undergrad and a little bit from grad school.
29:32Sean Pyles:That's closer to like 100k, which is pretty high. So it's definitely in the back of my mind. I'd like to probably start paying that off. Are you currently paying it off at all? A little bit, yeah. And that's actually just because my employer actually has a student loan forgiveness program. So they're actually paying up to, I think it's like$400 every other paycheck. Wow, okay. So you get a 6 % match from this employer and they're helping you pay off your student loans. That is correct. Sounds like a good job. Yeah, it's definitely great. Other than that, the only other debt I have is a medical debt from a surgery that I had back in last November.
30:11Sean Pyles:Are you on a payment plan for that? Yes, I think it was like$2 ,500 or$3 ,000 left on that. And yeah, it's pretty much just like a minimum payment plan that I can put on it because there's no interest on it. That's good to hear. I want to turn to something else that you asked us about, which was closing accounts with banks that you used to work with and also managing accounts at different institutions. So talk with us about what your questions are there. regarding like the high yield savings account and whether I should kind of put everything under one umbrella or like you know sort of like one house so to speak so if I found like a good high yield savings account should I move my checking account and savings account you know kind of over to that maybe just for like ease or like simplicity or maybe some banks like that because I've seen some high yield savings accounts seems like you can only have one if you opened up a checking account to or something along those lines.
31:06Sean Pyles:But for instance, Wells Fargo is my current bank. And I've had that since I was a kid. So for that reason, it's like my credit card with them is the longest history that I have and probably plays into my credit number and all of that stuff. So if I was to close all those accounts and move somewhere else, I suppose I'm worried that would hurt my credit and then I wouldn't be able to bounce back in any reasonable time or something. or maybe it's just too much of a hassle.
31:34Elizabeth Ayoola:Well, Jake, I'd like to share and tell Sean's business that he has like 10 million different accounts and they're not all with the same person. So I do think it is about personal preference. I personally only have a high-yield savings account and a checking account and they're with two different banks. So it really is about your management style. Can you, you know, is it going to be stressful for you to manage? I don't know, five different accounts, five different places, but you absolutely do not have to close down all of your accounts with Wells Fargo to open a high yield savings account somewhere else.
32:03Elizabeth Ayoola:So it really just is about what you can manage.
32:05Sean Pyles:And it can be helpful to have your checking at one institution and your savings at another. Again, so you're less likely to easily pull from your savings. You'll have to wait a few days before you can transfer anything into your checking account. That's how I like to have things set up personally. When it comes to your banking accounts and your credit cards, you would most likely be able to close that bank account without any impact on your credit. I would be really surprised if Wells Fargo closed your credit card as a result of you closing your bank account. But I would encourage you to consider leaving that credit card open because credit history is the third most significant factor in your credit score after payment history and credit utilization.
32:44Sean Pyles:So closing that credit card account could shorten your history and then reduce your overall available credit. And those two things could harm your score. So unless you have a really, really compelling reason to do so, you can probably just leave that credit card account open. Okay, yeah, that makes sense. Okay, well, Jake, we've run through a lot of different categories of your finances. Do you have any other topics you wanted to talk with us about or questions for us? You did mention prioritization as far as going straight for maybe the emergency fund first and then maybe going back to the Roth IRA or something.
33:15Sean Pyles:But is there a way or have you heard of people or could I potentially do multiple at the same time?
33:22Elizabeth Ayoola:Yes, yes, yes, please do if you can.
33:25Sean Pyles:Okay, because I think it'll take several months to get my emergency fund up to a more acceptable three to six month range. But I want to still be contributing to my Roth IRA, as well as trying to max out my HSA at the same time. So yeah, I wasn't sure if that's something you'd recommend for people.
33:45Elizabeth Ayoola:Sorry, I was screaming yes, because I love to tell people, because that's a common question. And you can absolutely do all three. I do all three at the same time. So I use automation to make my life easier. But budgeting is important if you're going to automate. So you're not at negative at the end of the month. But you can absolutely do what works within your budget and contribute to all three at the same time.
34:04Sean Pyles:Multitasking is often the only way you can make real progress on a lot of financial goals. Simultaneously, if you wait until you have your emergency fund at three to six months, and then you start investing for retirement. I mean, you've lost that time that you could be investing in getting the benefits of compound interest. And I just turned 34, Jake, so we're getting up there. We got to use every year, every month, every paycheck that we can to save for retirement. We sure do. Thanks. That's another follow-up question with all of that. So if I was to save up for a car or a down payment for a house, maybe say like in five years from now, maybe six, seven years, is what is the best or the safest maybe vehicle for that?
34:44Sean Pyles:Like, would it be the high yield savings account? Should I go for maybe like a money market account or personal brokerage account, something like that? General rule of thumb is that if you need the money within five years, you don't want to invest it. You want to have it in something like a high yield savings account so you are getting some interest on it. If you're looking closer to six to seven years, it gets a little bit fuzzier. I get the impression that you're a pretty risk-averse guy and you want to keep things as safe as you can, in that case, you might want to split the difference and look into something like a certificate of deposit where you could get a higher yield than with a high yield savings account most likely, but it wouldn't be as at the whims of the market as like if you're investing it in a taxable brokerage account.
35:25Sean Pyles:So look at different rates that you could get for different terms of CDs and see how you might be able to do something called a CD ladder where you have different CDs with different terms in order to continue to earn interest on the money you're putting into these accounts. I've heard of these a couple of times. I haven't wanted to look into CDs for some reason. So that'll be something I have to check out. Yeah, why not? I mean, it might make you feel super savvy using this new financial product.
35:50Elizabeth Ayoola:Yeah, people do find them confusing. The main thing with CDs though is you can take it out early, but you might get penalized. You should try to be sure that you can keep it in for the term, whether that's three months, six months, five years, so you can get all the interest that you need to get.
36:05Sean Pyles:And also consider how much money you could put into a CD at a time. Obviously, the more you have to put into it, the better your return is going to be. Cool. Yeah, thanks a lot. I feel like I could ask you guys like a million questions, you know, just keep going down the rabbit hole here. But maybe it's probably best to leave it here with these questions. Yeah, well, I hope you feel a little bit better about your savings and investing strategy given where you are in life right now, this transitional moment.
36:28Elizabeth Ayoola:And congratulations.
36:30Sean Pyles:Thanks a lot. But yeah, I appreciate all of the info and I think it'll definitely help set me up for the future. Keep us posted on where you land with these various accounts and how your budget shakes out once you're more settled in your new life. Yeah, I appreciate it. I sure will. All right, well, thanks, Jake. Thank you. That's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdballet.com. And a reminder that you can submit your budget for us to possibly review on an upcoming episode.
37:08Sean Pyles:Just use the link in the episode description. Join us next time to hear about whether credit card fees are still worth their ever-increasing cost. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.
37:23Elizabeth Ayoola:And here's our brief disclaimer. We are not your financial or investment advisors. this nerdy information is provided for general educational and entertainment purposes only and it just might not apply to your specific circumstances this episode is produced by tess bigland hillary georgie helped with editing nick carismi mixed our audio and a huge shout out to nerd wallets editors for all the ways they help us and with that said until next time turn to the
37:49Sean Pyles:nerds.
37:56I see you.
37:58Elizabeth Ayoola:Avatar Fire and Ash is now streaming on Disney+. It's the film critics are calling the best Avatar yet.
38:05Sean Pyles:Go, go, go, go!
38:06Elizabeth Ayoola:A true epic and completely jaw-dropping.
38:08Sean Pyles:This is the only purest thing in this world.
38:11Elizabeth Ayoola:Return to Pandora on Disney+. It will be an adventure for the whole family. And watch the Oscar-winning phenomenon at home.
38:18Sean Pyles:This is sick! Avatar Fire and Ash, now streaming on Disney +, rated PG-13.
38:26Elizabeth Ayoola:Every Wednesday, we cover Microsoft on Windows Weekly. Hi, this is Leo Laporte from the Twit Podcast Network, inviting you to join me, Paul Therott, and PC Magazine's Chris Hoffman as we talk about new Windows releases, Microsoft's new model release for its AI, and the new release of Halo.
38:46Sean Pyles:I think you're going to enjoy it. Windows Weekly. Tune in at our website, twit.tv slash www or wherever you get your podcasts.
From the publisher
New job, more income — now what? Hear how one listener is managing his Roth IRA, health savings account, high-yield savings, and more.
Is it smart to use a Roth IRA like a savings account? How should you prioritize your money across savings, debt, and retirement after getting a higher-paying job? Hosts Sean Pyles and Elizabeth Ayoola answer a listener’s question about managing multiple financial goals and choosing the right accounts for short- and long-term needs. But first, they share their money hot takes, including Elizabeth’s thoughts on Buy Now, Pay Later (BNPL) loans and Sean’s interest in stronger pro-consumer protections in light of recent federal rollbacks.
Then, they talk to listener Jake, who recently relocated for a new job and is navigating how to allocate his money now that he’s earning a bigger paycheck. Jake wants to know if it makes sense to use a Roth IRA for savings and how to simplify or optimize his mix of bank accounts. They cover how to prioritize emergency savings, retirement contributions, and future goals like a home purchase, all while avoiding analysis paralysis and making the most of high-yield savings accounts.
Inspired to navigate your finances with an advisor? Use NerdWallet Advisors Match to find vetted professionals today at https://www.nerdwalletadvisors.com/match
Learn more about NerdWallet Wealth Partners: https://nerdwalletwealthpartners.com/
Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header
In their conversation, the Nerds discuss: how to use a Roth IRA for savings, Roth IRA withdrawal rules, high yield savings account vs Roth IRA, best high yield savings accounts, what is a CD ladder, Buy Now Pay Later pros and cons, budgeting after a raise, how to prioritize financial goals, how to automate savings, how to manage multiple bank accounts, closing bank accounts and credit score, best place to save for house down payment, emergency fund vs Roth IRA, what to do after getting a new job, student loan repayment benefits, HSA contribution strategy, how to save for a house in 5 years, budgeting in high cost of living area, saving for short-term goals, pros and cons of online-only banks, how to overcome analysis paralysis in finance, Roth IRA vs high yield savings account, how to choose a bank, CFPB budget cuts impact, FTC click-to-cancel rule rollback, responsible use of debt, financial planning for tech professionals, credit score impact of closing bank accounts, reverse budgeting explained, safe ways to grow savings, how to build financial peace, using automation in budgeting, HSA vs IRA vs savings, debt vs savings prioritization, how to start a CD ladder, and when not to invest money.
To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email podcast@nerdwallet.com.
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