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Why It Doesn't Pay to Save

Oftentimes, people shy away from these accounts because they qualify as investments - the money doesn't sit safely in a vault, waiting for you to claim it. Rather, it is invested into different mutual funds or various stock options. However, account holders can specify the level of risk they are willing to take with their money and, according to Schwark, save a significant amount of money through the tax deferment and long-term investment.

Consider investing in the stock market.
Those who can focus on long-term gains should consider getting into the stock market, since the poor economy has driven the prices of stocks so low. "If you can hold the stock for the next 10 years it's a good time to buy," Satyavolu explains.

Buy municipal bonds.
A bond is a formal contract to repay borrowed money with interest at fixed intervals, except in this instance, you are the lender. A municipal bond, specifically, is essentially an IOU from a city or local government agency that uses the funds to finance community projects such as sewer construction or road repairs.

According to Satyavolu, bonds are a good option for cautious investors, who profit from the interest they receive and benefit from the fact bonds are exempt from federal income tax and, in many cases, state and local taxes as well.

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