If you are moving or preparing for a new life abroad and feel lost regarding financial terms, and you don’t know how to manage your money in the United States, don’t worry. We are here to demystify the available options and the most common terms, helping you enhance your understanding of the subject and effectively manage your money in America.
Moreover, if improving your financial education is a goal, I recommend exploring information before diving in, as there are numerous sources available, many of them free. Additionally, remember that the United States offers ample opportunities for financial growth. However, to take advantage of them, it’s essential to understand the right strategies based on your profile.
Checking Account:
A checking account in the U.S. is a banking tool that allows for frequent transactions, such as deposits, withdrawals, transfers, and payments. It is ideal for daily expenses, offering easy access to funds. Some banks allow immediate opening of a checking account, facilitating the initiation of financial transactions.
Savings Account:
In the United States, people use a savings account to store money. However, the savings yield in the U.S. is usually low. This type of account allows customers to set up automatic transfers to the savings account, facilitating financial organization. This way, it’s possible to ensure an emergency fund or even make long-term investments. On the other hand, it’s important to consider the yield rates offered by each financial institution. Therefore, before opting for this type, thorough research is essential to choose the best option.
High-Yield Savings Account (HYSA):
An HYSA is a savings account that offers higher interest rates compared to traditional savings accounts. This option may be interesting for those seeking higher returns on their savings, although the interest rates may still be modest compared to other forms of investment.
Individual Retirement Account (IRA):
IRAs are investment accounts designed to help individuals save money in the U.S. for retirement, with tax benefits. In the U.S., IRAs are divided into two main types: Traditional IRA and Roth IRA. Both provide tax benefits, including annual contribution limits. In 2024, contribution limits for IRAs are $7,000 for individuals under 50 and $8,000 for those aged 50 or older.
401(k) Plan:
The 401(k) is a retirement plan offered by many employers in the United States, and employees can contribute to this plan by applying their money before receiving it. Additionally, many employers match a percentage of employee contributions. Investors defer tax growth on funds invested in the 401(k) until retirement. Lastly, it’s important to note that the contribution limit in 2024 is $23,000.
529 Education Savings Plan (529 Plan):
The 529 Plan is an education savings program in the United States that allows individuals to save for qualified education expenses, including college, which is one of the major expenses for young Americans. Moreover, this plan offers tax benefits, as earnings grow tax-free when used for educational expenses. The 529 Plan helps smartly save money in the U.S. for these expenses.
Stock Market Investments:
Investing in the stock market in the United States provides a wide range of opportunities for those looking to grow their wealth. With one of the largest and most liquid stock exchanges globally, such as the NYSE and NASDAQ, investors have access to a diversity of stocks from leading companies worldwide in sectors like technology, health, finance, and energy. Additionally, the regulatory focus and transparency of the U.S. market provide a robust environment for investments. Investors can use different strategies, from individual stocks to index funds (ETFs), to build portfolios aligned with their financial goals. However, it’s important to conduct thorough research, understand risks, and, if necessary, seek financial advice to make informed decisions in the dynamic and exciting world of the U.S. stock market.
Furthermore, when considering your financial strategy, it’s essential to explore opportunities, such as linking your account to apps that round up expenses and invest the amount in an investment account, as demonstrated by Acorns. This additional approach can contribute to increasing your income over time.
In the final analysis, it is important to realize that the proper use of these plans not only provides tax benefits but can also offer financial security in the future. Therefore, it’s imperative to follow established rules and not hastily make premature withdrawals. By staying informed and consistently making sound money decisions, you’ll be ensuring a more stable and peaceful financial future.