In this episode of Money on My Mind, I answer Bowen Bergenfield's question: "Should you invest or use a high-yield savings account (HYSA) for a big purchase?" I break down the decision using S&P 500 historical data, explain the 5-year rule for saving vs. investing, and share my experiences to help you make the best financial choice.

 

This episode is all about using index funds for short-term goals, and why it's usually better to stick with high-yield savings accounts (HYSAs) if you're planning for anything less than 5 years out. We're diving into the data to help you make the most of your savings and minimize risk when you're saving up for something big.

 

Key Talking Points of the Episode

 

00:00 Introduction

01:17 The 5-year rule: Why 5 years is the tipping point for saving vs. investing

02:18 S&P 500 historical risk and return from 1926 to 2024

04:18 The risk of having 1 in 4 chances of losing money in a one-year period

05:59 Why it makes sense to invest long-term

07:16 What you can use your HYSA for

08:02 When to consider alternatives like CDs for short-term goals

 

Quotables

 

"For any goal under five years, I always use a high-yield savings account—no question."

 

"If you need the money in the next few years, don't gamble it. Protect it in a safe account."

 

"Focus on your goal, stay disciplined, and don't try to outsmart the market for short-term savings."

 

Links

https://bookwithbudgetdog.com/ped

Budgetdog

https://budgetdog.com