Lots of people want to save money and they are cutting back, taking on extra work, and sticking to budgets to meet their goals.

But once you start building your nest egg, do you know the best way to take care of it?

There are many savings and retirement vehicles that will help your money grow and might even give you tax breaks. But they definitely aren’t all the same and shouldn’t all be used for the same goals. Here are a few options and the best uses for them.

Short-Term Investments

Savings Accounts

An old-fashioned savings account gives you easy access to your money but won’t do much to help it grow. With minimum interest rates on most accounts, whatever money you put it will likely stay almost level year to year. These accounts are good for money you might need right away.

Money Market Accounts

These accounts pay a little higher interest return than a savings account and still allow you flexibility in case you need to access your money with a little advance notice. These are slightly different from Money Market Funds which are a type of mutual fund and not administered by local banks, but can still often be combined with conveniences like check-writing privileges.

Long-Term Investments

If you’re looking to build up your money to help pay for future education costs, a down payment on a home, or a dream vacation upon your retirement in 10 years, then start looking at ways to invest that will help your money grow. Before you look into any kind of market fund, consider the risk you are willing to take. More conservative funds generally yield a lower return but with less risk (but certainly not no risk) of huge fluctuations. More aggressive funds are more likely to return larger yields, but with more risk, because large fluctuations in prices and value are more likely (but not always certain – that’s the risk).

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Certificates of Deposit (CD)

A CD generally gives a larger interest return than a savings account, but you should consider your money as inaccessible because you will pay penalties and fees if you take money out before the CD term is over. Put funds you won’t need for at least 6 to 12 months in a CD, but pay close attention to the term length so you know how long your money will be largely untouchable without paying a fee.


Lots of people like to invest in stocks because of the potential for a big return. It’s best to invest in a mix of stocks because of the fluctuations in the market. Anyone who has seen the recent highs and lows on Wall Street can relate to how much of a rollercoaster stock investments can feel like. If you look at stock investments as a long road, and not a short roller coaster of ups and downs, you’ll be more in tune for the investment return they can yield. Put money in stocks that you want to grow over the long term.

Retirement Funds

A 401(k), 403(b), Roth IRA, or traditional IRA are all generally great investment ideas because they will help your money grow, but you’ll also save money on taxes as the money you put into them is either pretax or tax deferred, meaning you don’t have to pay taxes on the funds until they are taken out or you pay taxes now and not when you withdraw the money (which by the time you withdraw will be a larger amount).

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What about gold bars, life insurance, and second homes? As with everything else, these need to be weighed carefully. Generally, most financial experts don’t consider life insurance as a good savings vehicle. Gold bars might seem like a good way to put some money aside, but it’s like putting all your eggs in one basket and hoping for the best. Gold prices fluctuate as much as anything else. The same goes for real estate – you might flip a house and hit the jackpot or you might find you’ve bought a money pit.

Flexible Spending Accounts

If your employer offers a Flexible Spending Account option, it might be worth your while to look into it. An FSA is not a savings account at all – rather it is an account that you can put money into pre-tax and then use it during the year for health care related costs. You have to be careful as you won’t get the money back at the end of the year if you put too much in. But if you have similar annual health care costs and think you can estimate an accurate amount, an FSA can save you money on taxes.

Julia Quinn-Szcesuil
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