You probably have one savings account — one that you put money into occasionally but don’t think about too often. If so, good. You’re being smart about your money and putting some aside for emergency or future purchases. But what if we told you there are countless other types of savings accounts you could open that could actually increase your funds?
Here are five types of savings accounts you consider opening to help you grow your net worth:
A high-yield savings account
High-yield savings accounts are one of the most basic, but also beneficial savings account you can add to your portfolio. With this type of account, you earn a higher interest rate — up to 1.5 percent —for deposits than with traditional savings accounts, which usually top out at about .1 percent. The only downside: Some high-yield savings accounts come with higher maintenance fees than basic savings accounts.
A 401(k) and/or Roth IRA
If your job offers a 401(k) and offers to match your contributions, enroll in it. A 401(k) is a savings account in which money goes straight from your paycheck into an account where it can begin growing. It’s deposited before it’s taxed, meaning more money is deposited and it grows at a faster rate. You can’t access a 401(k) before a certain age without being penalized, which is only more incentive to deposit what you can and let it be.
If you’re self employed, consider a Roth IRA, which has similar rules about accessing the account before retirement, but is run through your own personal bank. You deposit what you can whenever you’re able, and your account grows over time.
Term deposits are very similar to savings and retirement savings accounts, only you can’t access them before a certain amount of time has passed. There are some serious benefits, though.
For example, Term deposits allow your money to do the work for you. They usually have much higher interest rates than typical savings accounts, meaning your retirement fund can grow faster. They’re also very affordable. Depending on your bank, a term deposit usually only requires a minimum balance of $500 or so. Finally, term deposits are flexible and low-maintenance. You can choose to open the deposit for 6, 12, 18, 24 or 30 months, or go for 3, 4, or 5 years. You can even decide to have interest paid quarterly, biannually, annually or at maturity. After that, you simply wait and cash in on a virtually risk-free investment.
Health Savings Accounts, or HSAs, are like 401(k)s because they’re funded from your paycheck. This type of account can grow your net worth in two ways. First, they can help you save money on medical expenses. They can vastly reduce the monthly premium you and/or your employer pay and they prevent you from making large, unexpected purchases.
Secondly, HSAs can lead to sizeable, tax-free nest eggs if you don’t get sick or injured very often.