Assume, for example, that I have enough cash set up in my brokerage account for a “rainy day” emergency fund in the money market or HYSA. Using my monthly savings of $600, I will then purchase a share of SPY or VOO. I understand that even if I save the $700 a month that I would like to, SPY and VOO are only trading at about $500, and I am unable to purchase fractional shares at Schwab. So that leaves me with additional income, what should I do with it.
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Add it to your emergency fund. Once you reach your savings goal, keep in mind that cash can lose value due to inflation. Your target should not be fixed, as the amount needed for 3-6 months of expenses in 2024 will likely differ from what you will need in 2025. It’s fine to slow your contributions to the emergency fund, but don’t just stop once you hit a certain number. It would be unfortunate to find yourself short in five years when you need it.
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It should be expanding at the same rate as inflation, if not a little faster, if you’re in a HYSA. It should only need to be increased if you have to dip into it for whatever reason or if your expenses truly increase by adding new ones. You won’t find yourself “losing” your purchasing power due to inflation alone.
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What? Interest rates on deposit accounts, including high-yield savings accounts (HYSA), have never kept pace with inflation and likely never will. I work in corporate finance, analyzing current rate environments, net interest margins, and costs of funds to make informed recommendations on product pricing (such as rates, fees, and rewards) for various financial products like credit cards and loans.
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Just keep depositing money into Schwab, and when you have enough to purchase a share, go ahead and buy it. I don’t quite understand your question. Essentially, you are just “saving up to buy a share.”
What do you do for other things that you can’t afford to buy with just one month of savings?
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Invest in cryptos, maybe?
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Consider moving to Fidelity and buying fractional shares.
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Go to a broker who will accept fractional shares or use a fund.
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SWPPX Schwab S&P500 fund with a lower expense ratio than both SPY and VOO.
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Fidelity lets you buy by a dollar amount, which is a fractional share. Easy.
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There is nothing particularly unique about VOO. You can purchase any low-fee, commission-free S&P 500 mutual fund on Schwab. Alternatively, you could open a Vanguard account and buy the equivalent mutual fund version of VOO (VFIAX).
Unless you are actively trading and require higher liquidity, lower spreads, or liquid options, there is no need to buy SPY.