This year's market dips are an important reminder of why it's important to invest and save money simultaneously

So far, 2022 has been a year of disappointing losses for those who are invested in the stock market. The S&P 500 is down about 20% year-to-date (TYD), leaving a bitter aftertaste for individuals who were feeling confident about portfolio gains coming out of 2020 and 2021. And while it's important to stay invested and uphold a long-term outlook, the market dips we've seen this year are a reminder of why it's important to have money invested in addition to cash savings.

While the stock market has shown losses in 2022, high-yield savings accounts have been increasing the interest rates they pay you on your balance. Some of the current highest rates have reached 3.50% APY. Of course, this still isn't enough to earn you life-changing money, but an untouched savings balance has still increased this year. Having a healthy mix of investments and savings could assuage any fears around affording large upcoming expenses without taking your money out of the market.

"This year has been a great example of why money for short-term needs should be held in cash in a high-yield account, not invested in the stock market," says Tony Molina, a CPA and Product Evangelist at Wealthfront. "Take your emergency fund, for example. That's money you're keeping for a rainy day — say an unexpected medical bill, house or car repair, or job loss — so you don't want that money to be subject to market volatility. No one wants to receive an unexpected medical bill only to find that your emergency fund is now less than you expected because the market had a bad day."

At the same time, Molina cautions against over-saving. It's important to ensure that a sizable chunk of your net worth is able to outpace inflation and typically, only keeping money in a savings account won't allow you to do that.

"Beware that there is such a thing as saving too much in cash," he says. "If you don't invest enough of your money, you won't be able to keep up with inflation. But you should only invest money that you don't expect to need in the next three to five years."

This way, you have a longer time horizon to rebound from any short-term market dips. 

Of course, before you begin to invest, you'll want to make sure you have a fully funded emergency savings account. Having an emergency fund allows you to avoid selling your investments to pay for an unexpected expense, like a surprise car repair or a leaky roof. Experts typically recommend having three to six months' worth of savings stashed away in a high-yield savings account.

Select ranked LendingClub High-Yield Savings as the best overall account, as it offers a high APY and no monthly fees. Of course, there are a variety of options. The SoFi Checking and Savings offers new account openers a welcome bonus. Wealthfront also offers a a Cash Account with "savings buckets" that let you organize your savings goals while still earning interest on your balance.

And when it comes to figuring out how much money to save versus invest, it's important to remember that it mostly depends on your budget and your personal goals. You want to make sure that your income can support the amount of money you'd like to save and invest each month.

"A good target in general is to save at least 10% of your income each month, but the percentage that you invest vs. save in cash should be based on your individual goals," Molina says.

If your goal is to buy a house in one to two years, you'll likely need to save more than you invest. On the other hand, if your goal is to just build wealth it probably makes sense to invest more money than you save. You just have to strike a balance between the two that works for you. If you need help pinpointing this balance, you can try speaking with a financial planner who can analyze your budget and goals and provide personalized recommendations.

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* SoFi members with direct deposit can earn up to 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.60% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 12/12/23. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.