The Wealth-Building Tool Generation Z Needs

Did you know that a health savings account (HSA) just might be the secret to financial happiness? Now and long down the line? You're about to!
by Rachel Morgan Cautero August 22, 2019
So, you were born between 1995 and 1999. That means you’re a member of Generation Z! You’re into everything from Supreme and sneakers to… money diaries? We hope so. Now that you’ve been in the workforce for a minute, you’re probably beginning to feel a sneaking suspicion that you should be saving for the future. Smart. You may have student loan debt and a car to pay off (if you don’t, well done!), but there are lots of ways to save for your long-term well-being, which will serve you in a way those new sneakers just won’t 10 years from now. Plus, it’s a lot easier to do it while you’re young and don’t have anyone else (ahem, kids) depending on your paychecks!

The Best Parts of Your Health Savings Account

In addition to 401(k)s, IRAs, and the like, health savings accounts are a great savings tool you should be taking advantage of. Why? So many reasons, but let’s start here: because you’re young, and health savings accounts allow for compound interest.
Compound interest is a means of calculating interest on the principal balance of your funds, plus all the accumulated interest. It’s a total financial #win. 
Let’s say you put away $2,000 with a 5% annual return (i.e. “interest”). With compounding interest, you’d end up with more than $3,200—without adding another penny to the account.  Health savings accounts also act like a traditional IRA, in that you can withdraw funds, penalty-free, once you hit age 65. Plus, you can contribute tax-free dollars and let them compound (there’s that word again). Oh, and the money in your health savings account can be used for any qualified health expenses, but you already knew that, didn’t you?

401(k)s with an Employer Match

When you started your first job (and if you haven’t yet, read closely!) you probably received a mountain of paperwork. One thing you should’ve definitely paid attention to in that stack? Your employer’s retirement options. Ideally, your employer offers you a 401(k) retirement savings plan with an employer match.  This means that your employer will match the percentage of your income that you allocate to your retirement account. Of course, there’s a limit of what an employer will match, usually around 3-4%. For example, if you contribute 3% of your pay to your 401(k), your employer might contribute 3% on top of that, and—boom!—you’ve got yourself a nice little 6% retirement savings. Always take advantage of an employer match. It’s like free money, honey.

Early Investments

Sure, if you have a 401(k) you’re already investing in the stock market. (And if not, you should absolutely make sure those funds are invested appropriately according to your risk tolerance and long-term financial goals! More on that in another article.)  But now is the time to start building your investment portfolio. While it may seem daunting to put aside a percentage of your income to invest in the stock market, the sooner you start, the better. Why? You guessed it. Because of compound interest.
The sooner you start investing, the less you’ll have to put away for retirement, and the more you’ll have when it’s time to retire.
Compound interest is one of the most powerful wealth-building tools in your financial arsenal, and you should take advantage of it wherever you can, from your health savings account to your investment portfolio, and beyond. 

Why Now?

You’re young! So we understand that retirement feels far-off, and building wealth seems like an abstract concept that doesn’t really apply to your life. But by using wealth-building tools like a health savings account is a simple way to set up your future self for financial success. And you’re never too young for that, am I right?

Take the first step
in taking care of you.

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