Want To Instantly Grow Your Net Worth? Move Your Money Into These Types of Accounts

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6 days ago

High inflation has taught Americans smarter ways to save. As a result, many people are growing their wealth more quickly, even when the cost of living remains high. Doing so doesn't require learning complex investing techniques or even having big chunks of money. It's all about where you put your savings.
A recent JPMorganChase Institute analysis found that savvy consumers are thinking beyond the traditional savings account. Here's what they're doing to boost their net worth without requiring risky investments, and how you can too.
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Why Your Bank Account Isn't Cutting It
While getting into a savings mindset is great, if you're only using traditional savings and checking accounts that have no or low annual percentage yields (APY) then you are literally leaving earnings behind.
Worse, you're not keeping up with inflation, either, which can range between 2% and 4% in normal economic times (and during the early days of the COVID-19 pandemic, hit a high of around 8%).
Instead, take advantage of better growth with the following accounts.
Money Market Accounts — Flexible and High-Yield
On the surface, a money market account looks and acts like a checking account — you put money in, and you can take it out, via checks or debit cards. Where they're different is that they often come with a higher APY than a regular checking account (many checking accounts don't earn interest at all).
For example, an account with a 4% APY on a balance of, say, $10,000, is netting you an additional $450 per year.
These accounts may also have limits such as a restricted number of withdrawals, a minimum balance and minimum deposit amounts, but most likely you'll be happy watching your money earn interest, so you won't mind keeping more of it in there at a time.
These accounts are typically held by banks, which are FDIC insured.
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Certificates of Deposit (CDs) — Best for Lock-In Growth
Next up are certificates of deposit (CDs). These financial products are especially good when interest rates are high and you don't need immediate access to your money.
When you put money into a CD, you 'lock in' that money for a set time period, often between a few months up to one to two years maximum. You really want to be sure that you don't need that money before that time is up, however, because you'll typically pay an early withdrawal penalty if you do take the money out, defeating the whole purpose of trying to grow it.
It's good to invest in a CD if the rate they offer is better than what you can get in a more liquid account, or if you want to put money somewhere that you can just forget about it so it grows without the temptation to spend it.
Brokerage Accounts — Passive Growth With Market Access
A brokerage account is a step beyond mere savings. This is an account where you put money you intend to invest. From here you can transfer money in and out to buy and sell securities, or you can just hold the money until you decide what to do with it. Here, the money you put in benefits from compounding interest, which is to say that not only do you earn interest on the money you put in, but you continue to earn interest on that interest growth, as well.
There are different kinds of brokerage accounts:
Individual brokerage accounts, in a single individual's name only
Joint brokerage accounts, with two or more names, where assets are shared between owners
Retirement brokerage accounts, such as a 401(k) or Roth IRA, where your money grows on a tax-deferred basis or tax-free until withdrawal; you don't typically take this money out until retirement
High-Yield Online Savings — Easy Win for Risk-Free Growth
The simplest type of savings account to grow your money is a high-yield savings account. This functions just like a typical savings account, but often has a significantly higher APY.
It's best to pick ones that are insured by the FDIC and that don't charge fees. There are plenty of different banks offering these kinds of savings, so it shouldn't be hard to find one that works for you.
How To Choose the Right Account Mix
If you're not sure how to choose the right accounts for you, remember some basic principles of saving:
Save more. Saving as much as possible is always a good idea, from emergency funds to retirement or educational accounts. Experts recommend that saving between 10% and 20% of your income is a good goal.
Tax smart. Save your money in tax-smart ways. Talk to a financial advisor if you're not sure.
Stay liquid. Assess your liquidity needs — don't tie up money you need.
Diversify. Don't put all your funds in the same place. Diversification is important to growth.
Set goals. Set savings goals. Research shows that it's easier to save when you're saving toward a goal. Talking with a financial advisor can help you determine these goals.
Remember that you don't have to make big, dramatic moves to grow your wealth. Even small moves from one account to another can have a big impact on your net worth over time.
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This article originally appeared on GOBankingRates.com: Want To Instantly Grow Your Net Worth? Move Your Money Into These Types of Accounts