Savings represent that portion of your income or earnings that is put aside and not spent.
Life can be full of surprises, both good and bad. Building savings is a great way to ensure that you have extra cash available for emergencies, unexpected bills, medical expenses, and future goals.
Most importantly, savings are the key to financial security and building a lifetime of financial well-being.
Interest-bearing savings accounts allow you to grow your balance.
Reasons to put your money into a savings account:
Assume you deposit $1,000 into a savings account that offers a 2% interest rate compounded annually. If you do not withdraw any money, your balance will grow as follows:
If you contribute more to your savings account each year, the amount of interest you earn increases and compounds even faster.
Of all the reasons to save, retirement is perhaps the most important; once you stop working, you may have to depend on these savings to cover all your expenses for the rest of your life.
There are many ways to invest for your retirement, whether through an employer-sponsored retirement plan, such as a 401(k), or a self-directed investment account.
401(k) | IRA | |
2017 | $18,000 | $5,500 |
Additional Catch-Up Contributions for those over 50 | $6,000 | $1,000 |
2018 | $18,500 | $5,500 |
Additional Catch-Up Contributions for those over 50 | $6,000 | $1,000 |
Depending on what type of account you have, traditional or Roth, each has different tax-deferral benefits: