When choosing from the best types of investment accounts for young investors to open, you should consider when and how you plan to use the money (education, retirement, etc.) and whether they are qualifying or non-qualifying investments.
An individual brokerage account is one of the most basic and flexible types of investment accounts you can open.
A money market fund (not to be confused with money market accounts) is a mutual fund that invests only in cash and cash-equivalent securities.
Money market fund (cash equivalents)
While retirement may seem far away and these accounts may not be your top priority, starting early always acts as a smart decision because building wealth reliably requires time.
In brief, these act as company-sponsored accounts provided by some employers. They work by having you designate a percentage of your income (from each paycheck) to contribute throughout the year.
A 403(b) plan is the equivalent of a 401(k) for people who work at non-profit, tax-exempt businesses. Contributions are tax-deferred, meaning you pay taxes at the date of withdrawal.
403(b) & 457 plans
When you retire and start withdrawing money, any capital gains you realize come to you tax-free. This reverses the tax effect seen with traditional IRAs where you contribute money tax-free and pay taxes when you withdraw.
For Americans, healthcare can be a significant expense and health emergencies can happen to anyone. A health savings account (HSA) is a savings account specifically used for health-related expenses.
Health Savings Account (HSA)
Flexible spending accounts (FSAs) are only offered through employers- you can’t open one on your own. These are sometimes referred to as flex spending arrangements.
Flexible Spending Account (FSA)
A 529 savings plan is used to pay for education expenses with tax-advantaged dollars.
529 savings account
A Coverdell Education Savings Account (Coverdell ESA) is a custodial account or trust created to pay for the designated beneficiary’s educational expenses.
Coverdell Education Savings Account
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