Finances can seem scary. This article breaks down the three most important accounts that will help you grow and save money over your lifetime. It also discusses the two main contributors that lead to poor financial health.
Contrary to popular belief, you don’t have to make tons of money to become wealthy. The key factor is actually proper investing and understanding the various ways in which accounts can save you money or make you money over time. Even if you contribute very small amounts, you will still come out ahead if you follow these basic principles.
Open a Roth IRA
Anyone can open an account called a Roth IRA, and the sooner, the better. This is a personal account that you can use for retirement, for a down payment on your first home, or for your children’s college expenses.
It’s incredibly versatile. Plus, the money you invest in this account has already been taxed. which means you won’t have to pay taxes at the time you pull the money out.
Your money goes into your Roth IRA, and can either earn whatever interest rate your bank or platform offers, or you can choose to invest that money in stocks or bonds. Again, contributions grow rapidly over time.
There is always an annual contribution maximum for a Roth IRA. For 2021, the maximum is $6,000. There is no minimum, however, so you can opt to contribute $5 for the entire year and that’s just fine.
The key thing to note about a Roth IRA is that it can serve as a healthy alternative to other retirement accounts, such as a 401K. This isn’t the case for everyone, but for people who switch jobs a lot and cash out their 410Ks or leave them widowed, this is a great alternative.
You don’t have to worry about migrating a Roth IRA every time you get a new job. It’s also possible to continue contributing to the Roth IRA if you have a gap in employment or choose to stay home with your children.
Open an HSA
A health savings account, or HSA, is another savvy account for growing money, but it can also save you money. If your employer offers an HSA enrollment option, take it, if not, you can open an HSA account on your own and make contributions.
An HSA account allows you to contribute money pre-taxes into an account that you can then use for medical expenses. This money does not disappear at the end of the year, it just grows.
In many ways, you can consider this another type of retirement account, but it is more helpful for your immediate life because you can use it at any age.
You can use HSA account money on co-pays at the doctor, dental bills, glasses, medications, vitamins, acupuncture, and more. The government provides a specific list. Your HS provided will send you a simple debit care to pay for these.
A health savings account (HSA) can help you lower your taxes, pay for health care more easily and even save for retirement.