saving and growing money

Growing and saving money

By Diego Guerrero

Savings Accounts (Banks & Credit Unions)

•Very low risk (FDIC/NCUA insured)

–Easy access to money

–Best for emergencies and short-term goals
- Low interest rate compared to a High-Yield savings

Banks are the most common example of a savings account

High-Yield Savings & CDs

•Low risk, better interest than regular savings

–CDs lock money for a set time

–Good for short- to medium-term goals

401(k) & IRA Retirement Accounts

•Designed for long-term retirement savings

–Tax advantages help money grow faster

–Employer matching = free money (401k)

Traditional 401K

• Contributions are made pre-tax, which lowers your current taxable income. The investments grow tax-deferred, and you pay ordinary income tax on withdrawals in retirement. This is beneficial if you expect to be in a lower tax bracket in retirement than you are now

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Roth 401k

Contributions are made with after-tax dollars, so there's no upfront tax deduction. However, qualified withdrawals of contributions and earnings in retirement are entirely tax-free. This is advantageous if you expect to be in the same or a higher tax bracket in retirement.

Investments (Stocks, ETFs, Mutual Funds)

•Higher potential growth

–More ups and downs (risk)

–Best for long-term investing