Schwab MoneyWise ®

Eight Savings Fundamentals

Where should you put your money first?

Our Two Cents

Try adding one of these steps per paycheck. Just like going to the gym for the first time, saving more than you’re used to can be a shock to your system. Building up to your ideal amount feels more manageable and can help your new saving habit stick.

You may have several savings goals. Where should you start? Here’s a way to prioritize goals that can make saving seem more manageable.

We recommend that you start with the first four Savings Fundamentals and complete them in order. After you have a handle on the first four, move on to the last four and complete them according to your personal priorities.

  1. Contribute to your company's retirement plan up to the maximum employer match. Even if money is tight and you have multiple priorities, make it your first goal to contribute at least enough money to get all the matching funds your company offers.

  2. Pay off nondeductible, high-interest-rate debt like credit cards. If you no longer have to pay 13% interest (or whatever high rate you owe on debt), you can keep that money for other things.

  3. Create an emergency fund to cover at least three months of essential living expenses. This will help you keep from dipping into long-term investments or borrowing at unattractive rates when you need cash in a hurry. And remember, you may want to save even more in your emergency fund if you think you might be changing jobs within the next year or are anticipating any other significant life changes.

  4. Contribute the maximum allowed to tax-advantaged retirement accounts. For example, if you're saving only enough to capture the match in your company’s retirement plan, increase it to the maximum allowed. Consider funding an IRA and contributing to a tax-advantaged Health Savings Account. The more you set aside, the more secure your future may be.

  5. Save for the down payment on a home. If you've mastered Savings Fundamentals one through four and your personal circumstances are right for buying a home, start saving for a down payment.

  6. Pay down tax-deductible, high-interest-rate debt such as a mortgage. Reducing debt—even if it's a tax-deductible mortgage, home equity line of credit, or student loan—can enhance your ability to save.

  7. Save for a child's education. To handle rising college costs, make the most of tax-advantaged college savings plans.

  8. Keep investing. To stay ahead of inflation, your money needs to earn more than many traditional savings accounts pay. The first step to long-term investing success is to get going right away.


Investing involves risk, including possible loss of principal.


