Saving
Long Term Saving
401(k)s
A 401(k) is a type of retirement savings account for employees in which employees designate a certain amount of their paycheck to be put into it. Sometimes, employers match this contribution. 401(k)s are formed with pre-tax dollars, meaning that your taxable income (the amount of income you will have to pay tax on) for a certain year will be lower if you make a 401(k) contribution and that you will have taxable income when you take the money out of your 401(k) later. 401(k)s will let you invest your money in certain things which vary from employer to employer. Any earnings from the investments will be taxed as well. It's common for employers to allow you to pick ETFs and/or mutual funds (see Investing section) but not specific stocks. You will be able to withdraw from your 401(k) penalty-free at age 59.5. There are maximums to how much you can contribute to your 401(k). Another type of 401(k) is a Roth 401(k). This account is similar to the standard 401(k) with the exception that tax is paid on the income before it enters the account, making it so that when you do withdraw it you don't pay taxes on the original money that entered the account or any profit made from investments. Note that a 401(k) is much more commonly offered than a Roth 401(k), and that some employers offer neither.
IRAs
Let's say your employer doesn't offer a Roth 401(k) or a regular 401(k). That's where an IRA, or Individual Requirement Account, can come in handy. They exist as both a regular IRA and a Roth IRA, and function very similarly to 401(k)s and Roth 401(k)s, respectively. The only difference is that IRAs aren't related to your employer and are managed entirely by yourself (though employers can contribute sometimes).
Making Sense/Use of These Accounts
All of the previously mentioned accounts can be great tools for long-term savings, as the money is only accessible penalty-free after age 59.5. Therefore, it's best to put some, but not all of your regular savings into one or more of these accounts. This guide can help you choose the best retirement account plan for you.
Short/Medium Term Saving
Automate Your Savings
Several apps have been designed to automate the process of deducting savings from your paycheck so it becomes something you don't have to think about. Take a look at a full list of them here.
High-Interest Bank Accounts
It's important to let your money do the most work for you when it's being saved. High-interest bank accounts will allow you to get a percentage of your money back simply for depositing your money in a certain place. Here's a list of some of the savings accounts with the highest interest rates.
Saving vs. Investing
Saving and Investing both have their strengths and weaknesses. A key factor that will determine how much you save and how much you invest is liquidity, or how easily you can get your money from an investment should you decide to sell it. Liquidity is not a concern with savings, as all money is completely liquid. It is with investments, however. Therefore, it's ok to have a large portion of your money allocated to investments if your investments are very liquid, whereas it might be better to keep a smaller portion allocated to investments if they're less liquid. For example, you might want to have a significant amount in savings if your investments are in real estate (not very liquid). This strategy allows you have to money on hand for events that could occur without warning. On the other hand, if your investments were in stocks, a very liquid asset, it would be okay to keep a larger portion of your money in investments rather than saving since you could sell the stocks almost instantly, though this would depend on whether the market was open or not. It is worth noting that saving will not earn you a significant amount of money (though putting your money in a high-interest bank account will earn you some) like investing in assets will, so try and save some of your money but consider keeping some of what you'd normally save in very liquid investments.