If you recently entered the workforce, or you're starting to accumulate savings for the first time, you may be wondering what the most strategic move is for your excess income.
Some people believe that they have to have a certain amount of money saved up before they can start implementing a money growth plan, but that isn't true. It's never too early to be strategic with your money. In fact, the earlier you start, the better!
So, for those of you who are brand new to the working world or who are just getting started on planning for their future, let's go over the basic ways you can begin to make your money grow.
If you've been putting your paychecks in a checking account and they are starting to accumulate, it might be time to open a savings account.
Keeping all of your money in a checking account is sort of like stashing a pile of cash under your mattress. While a bank account is a very safe place to put your savings, when choosing between keeping it in a checking account or savings account, keep in mind that savings accounts accrue interest, while checking accounts do not.
Additionally, the money you put into a savings account accrues compounding interest. This means that the dollars that you gain from interest also grow. Put simply, it's interest on top of interest. The earlier you start, the more you can take advantage of compounding interest.
At The Federal Savings Bank, we have a variety of savings account options with varying interest rates.
If you want to plan ahead to the distant future, you can also begin saving for retirement by opening a retirement account like an IRA or a 401(k).
These retirement accounts have different benefits and requirements. The premise of both is that they will grow your investments significantly, but you cannot access the money without penalty until you reach the age of 59 ½.
When we say that retirement accounts come with 'some risk', we don't mean your investments face risk — in fact, there is a very high probability that they will grow exponentially. However, by putting your money in a retirement account, you face the risk of needing that money in your youth and being unable to access it. Therefore, you should not invest any money in a retirement account that you may need in the next several decades.
If you would like your money to grow significantly, but don't want to wait decades to be able to access your wealth, investing might be the right choice for you.
Investing is highly customizable. You can invest in funds or just individual stocks, you can seek help from a professional or try to educate yourself, and you can invest over the short term or long term.
If you are just getting started, seeking help from one of our bankers is a smart idea. We can help you come up with an investment plan that matches your risk tolerance, timeline and values.
Contact us today for more information on making your money grow.