The Smart Way to Save: Understanding the Savings Hierarchy (And When to Break It)
Saving money should feel straightforward, but when you have a variety of account types, benefits, and financial goals, it can quickly get confusing.
That’s why I use a savings hierarchy as a starting point with clients. It gives us a roadmap for where to put money first, second, and third based on tax efficiency, flexibility, and long-term benefits.
On Aug 19, 2025 at 2:00pm ET/11:00am PT, I’m hosting a webinar walking through my standard savings hierarchy and when it can make sense to deviate.
Here’s a high-level look at the typical order I recommend:
Emergency fund: Before anything else, having 3–6 months of expenses in a high-yield savings account gives you stability and peace of mind.
401(k) up to the match: Free money is hard to beat.
High-interest debt: Paying this down early can be a better return than any investment.
HSA (if available): A triple-tax-advantaged account for healthcare spending now and in retirement.
Roth IRA or backdoor Roth: Tax-free growth and flexibility later on.
401(k) beyond the match: Especially if your income is high and you need tax-deferred growth.
Taxable investment account: Great for short and long-term goals and financial freedom before age 59½.
ESPP or RSU strategies: These can be powerful, but they deserve a separate conversation.
That said, this order isn’t one-size-fits-all.
If you're planning to buy a home, take a sabbatical, or start a business, your strategy might look different. And if you have equity comp, you might have opportunities (and risks) others don’t.
That’s what I’ll be covering in an upcoming webinar, both the baseline savings hierarchy and the situations where it makes sense to adjust.
Want to join? You can register here and I’ll send you the recording even if you can’t make it live.