I get this question all the time: “How can I make my money grow faster?” I’m not an investment broker, so I can’t give you advice on buying stocks or bonds. And, personal savings accounts don’t pay as much interest as they used to, so I can’t help you there either.
But, there are two types of savings plans that offer matching funds, which means that your employer, or your state, will put their own money into your account to increase the money you put into the account. Never turn down FREE money! (Normally, I would tell you that there is no such thing as free money, but with these 2 plans there really is.)
Employer Matching Funds in Employee 401K Plans
If you work for an employer that offers a 401K or retirement savings, participate in the plan as soon as you are eligible. If you are eligible and you haven’t signed up yet, find out how soon you can start. Many companies offer to match your contributions. Not only that, but you will be putting your pre-tax dollars into this account, which means you can report less income for income tax purposes. That could mean a bigger tax refund or a smaller tax bill.
If you think you don’t have enough money to contribute, start out small and then increase your contributions. I have clients who did just that, who haven’t felt the loss in their monthly budgets. Remember: the first decision is to start to save. After that, you’ll find a way.
State Matching Funds from an Individual Development Account (IDA)
Another way to get matching funds is from an Individual Development Account (IDA). These accounts were designed to promote good money management and to teach savings habits. To open an IDA account, you need to have a specific goal in mind, such as saving for a home down payment, starting a small business, tuition for post-secondary education, etc. Once you meet eligibility requirements, you will put money in your IDA account on a regular basis, and your funds will be matched. Check with your individual state for eligibility and participating organizations.
But, what if you aren’t eligible for a 401K or IDA?
Don’t be discouraged. If you’ve made the decision to save on a regular basis, set it up to happen automatically. It’s the best way to make your money grow. If you have to go to the bank to put cash into savings, something will come up and you will decide to spend it instead. You will tell yourself that you’ll save next week, then next week comes and goes and you still won’t deposit the money into savings. When you have it taken out of your paycheck automatically, you never see the money, so it’s less tempting to spend it. With interest and time, your money will grow.