Q: I’m putting in more than $1,000 every month in a regular old bank savings account but I know this isn’t good for the long term. I can probably invest up to $200 in something else. My parents lost a lot of money in the stock market so I’m scared of picking stocks and cannot watch stock prices change every second. What else should I be looking at?

David Neubert / Flickr | http://www.flickr.com/photos/neubie/2273635564/

David Neubert / Flickr source

– Shawn S.

A: Letting a large amount of money sit a regular bank savings account is definitely not the way to go if you’re looking to grow your money. Many people don’t realize it and let their money earn fractions of a penny for every dollar deposited.

At a typical big bank, a standard savings account is paying around 0.01% APY, or $1 per year for every $10,000 in deposits.

It’s time to ditch that account for good — just close it. You’re much better off with an online savings or money market account, which is likely tol pay roughly 0.80% APY or more. Popular online banks such as Ally Bank, American Express Bank and GE Capital Bank offer savings accounts with at least 0.84% APY.

For the long-term, you should consider opening a Roth IRA and invest in index funds, which are mutuals funds with a large basket of stocks that tend to move with the entire stock market or a particular sector in the stock market. Index funds are much less volatile than individual stocks and there’s less risk that you’ll lose everything on one investment.

A trending investment is the target-date fund, a simple route to investing. It’s a diverse basket of index funds that is already balanced based on your retirement goals. Typically, target-date funds specify a retirement year and spread your money across a U.S. stock market index fund, a foreign stock index fund and a U.S. bond fund to account for the appropriate risk at any particular age.

If you’re expecting to retire in 30 years from today, you’ll probably go for a 2043 target-date fund. As you near the retirement, the investment risk of the fund decreases when it automatically shifts money from stocks to bonds.

With a diligent savings mentality, which is seem to have already, these two financial options — a decent online savings account and a Roth IRA — should comprise the foundation for your financial savings.

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