Bitcoin is all the rage these days. Millennials are increasingly interested in digital currency as a way to diversify their assets and get rich.
But bitcoin is not for everyone. Not only is the cryptocurrency extremely volatile—bitcoin is down 40 percent since the start of 2018—but it’s also difficult to understand. Even the most experienced investors find digital currency more complicated than, say, company stocks and ETFs.
Before you buy bitcoin, Bankrate’s Robert Barba suggests these two alternatives first:
Bump up your contributions
If the money you are putting into cryptocurrency is discretionary, the best alternative would be to give it to your future self by increasing your contributions to a 401(k). By doing so, you’re not only looking out for the you of tomorrow, but you’re also lowering your taxable income today.
For instance, if you’re 30 years old, earn $40,000 a year, have $10,000 already in your 401(k) and currently contribute three percent of your salary to it, Bankrate’s 401(k) calculator projects you’ll have $278,875 at 65.
Start growing a savings account
Is your safety net strong enough? Chances are it could be better. Before you buy cryptocurrency, make sure your emergency savings are solid. There is no better time to strengthen your savings than the present, since you never know when you’ll need it.
“Travel snafus, car accidents and medical emergencies are inherently unpredictable, and having the peace of mind to pay for the unexpected expense during such stressful situations is priceless,” says Andrea Woroch, a personal finance expert who is working with Marcus by Goldman Sachs.
The good news is that interest rates on savings accounts have risen pretty dramatically over the last several months, so you’ll be able to get some yield on your savings.
Retirement contributions and savings accounts aren’t as sexy as bitcoin, but they might serve you better. Give them a thought before taking the cryptocurrency plunge.