5 Warning Signs That Youre Not Ready To Start Investing, According To Financial Planners

<5 Warning Signs That Youre Not Ready To Start Investing, According To Financial Planners>

Instead of investing your money, Malani recommends keeping your money in a high-yield savings account if you're going to need your cash in one year.

High-yield savings accounts stand out from traditional savings accounts in that they reward you with a higher interest rate, allowing your money to grow even faster as it sits in your account — even when you don't actually make additional contributions. Sure, you won't earn hundreds of dollars in interest each month but it's a lot better than the pennies in interest you're getting through a traditional savings account.

And, when you keep money in a high-yield savings account, you won't have to worry about needing to make a withdrawal during a dip in the market when you might potentially lose money. There are many different high-yield savings accounts out there but Select named the Marcus by Goldman Sachs High Yield Online Savings as the best overall account and the Vio Bank High Yield Online Savings Account as the best account for earning a higher interest rate on your balance.

Another consequence of investing short-term money is the tax bill that will inevitably follow after you sell the asset you were invested in. Selling a stock or mutual fund triggers what's known as a taxable event and the amount of tax money you'll owe will depend on how long you held onto that particular asset.

If you sell an asset more than one year after purchasing it, you will pay long-term capital gains taxes, the rate for which will be 0%, 15% or 20%, depending on your taxable income or filing status. For most people, though, the long-term capital gains tax rate is lower than their ordinary income tax rate.

However, if you sell an asset less than one year after purchasing it, you will pay short-term capital gains taxes, which is equivalent to your ordinary income tax rate. Depending on your tax bracket, this could mean having to pay a much higher tax rate, up to 37%. When investing your money, it's often prudent to make sure you won't need to sell your investment within a year so it has more time to grow and to save on your tax bill.

Source : https://www.cnbc.com/select/where-to-put-money-need-in-one-year/

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Where should you put your money if you’ll need it in one year?

Source:CNBC

Where should you put your money if you’ll need it in one year?