What is Long-Term savings?

Long term savings , help plan for the future and come in handy when in one-time lump sum money needs , like buying a house or paying for college. Learning now to save money and become financially literate is extremely important and will help build your future. In uncertain times , financial literacy is becoming an evermore important skill. To give more access to financial literacy will help many people understand and takes the step to become financially stable and set for the future.

Here's How

The way these long term savings account work is through compounding interest , this interest is reinvested , added to the calculated interest and keeps on increasing and returns more and more money .The best way to achieve these long term saving , is with accounts like 401k’s ,Roth IRA , and Taxable brokerage accounts.

401k's Plan

401k’s are savings and investment plans that employers offer. 401k’s allow great flexibility in contributions, which is how much money you put into the account. 401’k is great if cash flow is not constant and employers may offer more than IRA plans. The downside to 401k’s. They carry significant fees which make it harder to grow your savings over time? If you withdraw before the age of 59.5 , you will have to pay a penalty and investment options are limited.

Roth IRA

Roth IRAs are retirement accounts , in which you can invest tax-free money , which means adding money that has been taxed and paid already. But this also means that there are no tax deductions .Roth IRA’s do not have minimum distributions ,meaning you do not have to pull out money until you choose too. There are some limits to Roth IRA’s. One of these limits is that there is an income limit , which must be $144,000 or less. You cannot withdraw earnings before the age of 59.5 and you will need other retirement accounts to save enough for retirement.

Taxable brokerage accounts

Taxable investment account , this does not have as good of tax benefits , it makes up for its flexibility. You can open this account with a brokerage company , and can withdraw any time with no penalties . You can access the savings within three days , which makes it safe of accidental purchases.