How to Set Your Savings Priorities? One Financial Planner’s Advice

When Trump accounts were introduced this July, I wondered: Should I take advantage of it? This somewhat convoluted vehicle is really a long-term retirement savings account for minor children. How should it stack up against my other savings priorities?

Financial planning starts with goals such as paying off debt and saving for retirement, college, a home, or helping family. If I have extra cash to save, how do I invest it in order to prioritize my goals? Here’s a framework for thinking about this question.

Regardless of your goals, paying off high-interest debt should come first. Credit card debt is almost always the top priority. Interest rates often exceed 20 percent, which is a dagger in any financial plan. Private student loans and personal loans that run above 10 percent deserve similar urgency.

Most planners recommend building an emergency fund before funding other long-term goals – this fund can cover, say, a home or car repair, or help buffer against a spell of unemployment. Without a robust safety net, you may be forced to draw from a retirement plan early or take on credit card debt.

The size of your safety net depends on your situation, but a rule of thumb is between three and 12 months of expenses. Keep this money safe in a checking, savings, high-yield savings, or money market account.  

If your employer offers a 401(k) match, make sure to contribute enough to capture all of it. A common structure is for the employer to match 50 percent on the first 6 percent the employee puts in. This match is like an instant, guaranteed 50 percent “return.” Give this the same priority as your emergency fund.

Once you’ve captured your match and built a safety net, you can start to fill up your other tax-advantaged buckets.

A Roth IRA is my usual next stop. The 2026 limit is $7,500 ($8,600 if you are 50-plus), with the money growing and coming out tax-free. If you’re on an eligible high-deductible health insurance plan, a Health Savings Account (HSA) is worth a look, too. HSAs offer a “triple tax advantage” in that money is tax deductible going in, grows tax-free, and can be withdrawn tax-free for medical expenses.

From there, contribute more to your 401(k) or 403(b). The contribution limit is $24,500 this year (it’s even higher if you are 50-plus); while few people have the excess income to fill this bucket, every little bit helps.

If you either still have money to spare, are self-employed, or your employer doesn’t offer a retirement plan, a taxable brokerage account is generally the next best option. You’ll owe tax on dividends and capital gains in these accounts, but capital gains rates are often favorable versus income tax.

These accounts are also more flexible than tax-advantaged accounts in that there are no contribution limits, no income restrictions, and no penalties for withdrawing before 59½. They’re a good fit for nearer-term goals like a home down payment. If that’s your priority, you may move this higher up the list.

If college is a goal for your kids or grandkids, a 529 plan is generally the most efficient way to save for it. The tax deductions are often minor (depending on your state), but growth and withdrawals are tax-free (like a Roth account) for qualified expenses.

If helping your kids graduate without debt is a top priority, you may also move this goal up the list. But I caution against funding your children’s college costs at the expense of your own retirement.

If you’ve managed to fill your retirement, college savings, and safety net buckets, you’re doing very well.

Now you can revisit low-interest debt. Many people try to accelerate mortgage payments, but it doesn’t make a ton of financial sense to put extra money toward a low-rate mortgage of 3 or 4 percent. Still, if you have the excess cash, you might consider paying this debt off for the satisfaction it brings.

This brings me back to where I started. Do I need a Trump account for my kids? These accounts let you contribute up to $5,000 a year for a child. Kids born between 2025 and 2028 also get a one-time $1,000 government deposit. If you’ve managed to fill up your retirement buckets, build up a decent brokerage account, and save for college, the Trump account might be a reasonable next step. But it’s still money earmarked for someone else’s future, which is why it’s last on this list.

Of course, this approach isn’t meant to be rigid. Priorities all come down to your goals and values. But this savings hierarchy can help you think about where to put your next bonus, tax refund, or other cash windfall.

Luke Delorme, CFP® is Director of Financial Planning at Tableaux Wealth in Great Barrington, MA (www.tableauxwealth.com), reachable at luke@tableauxwealth.com. To stay current on the Squared Away blog, join our free email list.

This blog post is for informational and educational purposes only and should not be considered financial advice. Consult a qualified professional for advice specific to your situation.