While there are numerous advantages to working as a freelancer, one of the biggest disadvantages is not having certain financial accounts set up for you automatically — most employers give full-time employees a retirement fund, as well as other savings types of accounts. Of course, you can absolutely set these accounts up for yourself as a freelancer, you just have to have the motivation (and knowledge) to get started.
One of the biggest benefits to having a savings account is that it gives you a place to keep your money that is separate from your regular checking account. This allows you to save money for emergencies, rainy days, and big goals that you might have in the future, like buying a home. When you place your extra money in a savings account, it is federally protected by the Federal Deposit Insurance Corporation (FDIC), which means that it’s a safer place than, let’s say, that pillowcase in your closet.
Another big advantage to utilizing a savings account as a freelancer is that it pays you interest on the money that is in it. While this interest rate might not be significant when compared to other types of high-earning accounts, it’s still more money than it would make if it were just sitting in a regular checking account (or somewhere in your home). Safe and reliable, savings accounts give you a place to keep your money without being penalized if and when you need access to it. (Other types of high-earning accounts will penalize you if you withdraw your money too soon or too frequently.)
Savings Account Tips for Freelancers
Knowing how much money to put into your savings account will depend on what you’re using your savings account for. Some freelancers utilize them as a “rainy day” or “emergency fund” account, while others have a specific goal in mind, like hitting the number they need for a down payment for a house or another big-ticket item. For freelancers wanting an emergency-type of account, most experts agree that the minimum goal is three-months’ worth of expenses. This would cover you in case you lost your job or needed to access an amount of money to cover an emergency bill.
If the goal you have will take you a long time to reach, you might consider only keeping some of your money in a regular savings account so that you can take advantage of the returns that you’ll get on a higher-earning account.