2. Safe and steady growth
For emergency fund accounts, you should strive to minimize risk while maximizing your return on investment. Solutions like high-yield savings accounts are federally insured up to $250,000. Likewise, other interest-earning solutions, such as money market accounts (which can offer even higher interest rates), also provide stable and steady opportunities for growing an emergency fund while offering ready access to money without the constant temptation to spend.
Starting a money market account may require you to invest more up-front (e.g. $1,500 minimum). However, superior APYs and access to checks, debit cards, and other emergency purchase tools make them helpful savings vehicles compared with stocks and equities, which may be less liquid and frequently change in value.
Certificates of deposit (CDs), financial solutions that offer competitive interest rates when you lock up your investments for periods of time, ranging from 30 days up to a year or more, also provide stable vehicles for financial growth. Many investors simultaneously buy tiers of these solutions, which pay back your deposit plus interest earned on their maturation, such as three-month, six-month, and 12-month CDs. Roth Individual Retirement Accounts (IRAs) and 401(k) investments can also provide significant tax benefits while building a stable investment portfolio. However, any funds withdrawn from your IRA or 401(k) prior to a certain age or time period may be subject to income tax and an additional tax penalty (for example, IRAs charge a 10% penalty for withdrawal before age 59½).