Where Do I Put My Savings?
There are many alternatives for where you place the money
you have allocated for savings.
First, there is a traditional bank savings account. These accounts are safe (up to FDIC limits), but tend to offer relatively lower rates of returns. They are more liquid that some other alternatives and many today can be tied to ATM accounts.
Then there are IRAs, which is short for Individual Retirement Accounts. These accounts offer the advantage of tax deferral; both allocations to the account and growth in the account incurs tax on a deferred basis only.
There is also a Roth IRA. This is like a traditional 401(k), with the difference being that earnings grow tax-free instead of being tax deferred.
Many websites have calculators to help determine which type of retirement account is best for you given your situation and retirement objectives.
Those with children who will be entering college in the
future can also consider one of the education savings plans available.
Depending on the type of account, these vehicles can allow for various types of
tax benefits on the amounts in the account. There are three types: the
Coverdell Education Savings Account (CESA), the IRC section 529 plan and the
Uniform Gift to Minors Account (UGMA).
Another alternative for savings dollars are medical savings
accounts. There are two types, including
Flexible Savings Accounts (FSAs) and Health Savings Accounts (HSAs). All three
are designed to help you saving for health-related expenses. FSAs are like
traditional “cafeteria plans;” money you put in can at pre-tax levels can be
used for a wide variety of health expenses.
HSAs enable employees with high-deductible health insurance plans to set
aside and invest money to use to pay the deductibles or other healthcare costs
in the future.
Also, savings can be parked in a brokerage account if you intend to do some
investing with the dollars.