3 ways to start building your wealth even with debt

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Americans are dealing with unprecedented levels of debt. According to a study from Experian, U.S. consumers owe more than $14 trillion dollars across all debt types, including mortgages, student loans, credit cards, and more. It’s the highest level of debt ever on record.

For the average household (which owes more than $90,000 in debt), these burdens can feel heavy. They might keep you from saving up, investing, or building wealth for your future. They could even put you in a bind should an emergency occur.

How do you build wealth with debt?
If you’re one of the many who are holding back on other financial goals due to high levels of debt, you’re not alone.

Fortunately, experts say you don’t have to let debts drag you down. In fact, with the right strategies, you can both pay down those balances and invest in your future at the same time. Here’s how:

  1. Start with an emergency fund
    Your first step is to stow away some cash for an emergency. Since you never know when a sudden expense could crop up, these savings can prevent you from falling further into debt down the line (not to mention hurting your credit score in the process).

“Save up a small emergency fund,” said Leslie Tayne, founder of debt relief law firm Tayne Law Group. “Without one, emergency expenses often end up going on a credit card, and with interest rates typically in the double digits, you don’t want that.”

Most experts recommend having anywhere from three to six months of expenses in the bank, depending on how reliable your income is.

  1. Open a high-interest savings account
    You can also open a high-interest savings account, which earns interest at higher rates than typical bank accounts.

Credible can help you find a high-yield savings bank account provider and interest rates that will boost your savings. Check out what options — from each banks’ minimum balance requirement to its APY — are currently available.

“It’s never a bad idea to start saving for the future and building a nest egg, even if you are paying off student loans or credit card bills,” said Phillip Allen, CEO of Common Sense Retirement Planning. “Analyze your monthly expenses and dedicate a small amount towards your savings account. It may not seem like much at the start, but $20 here and there adds up over time.”

It’s true: That $20 can go a long way thanks to compounding interest. The more interest you gain, the higher your balance goes, increasing your earnings every month you have the account. This is why shopping around for your savings account — and getting the best rate — is critical.

  1. Contribute to any employer-sponsored accounts
    If your employer offers a 401(k) or Health Savings Account, start putting funds toward these as well. Usually, these plans will also come with a matching policy, which allows your employer to make contributions to the account as well.

“You can contribute as little as 1% of your pay and your employer may also match some or all of the amount you contribute,” said Bill Van Sant, senior vice president, and managing director at Girard. “It may not be much, but it is a start, and you will develop good habits making investing a priority.”

Your employer might also offer an HSP — or Health Savings Plan. These can be used for medical bills and health-related expenses and are tax-free. If you have a health insurance policy with a high deductible, these can be great ways to offset those, especially when facing major surgery or medical problem.

The bottom line
You don’t have to let debts hold you back. By opening a high-yield savings account, contributing to your employer’s retirement plans, and stowing away small amounts for an emergency fund, you can start to build wealth and save for the future despite the debts you’re facing.

“While paying off debt is important, it should not come at the expense of not investing for one’s future,” Van Sant said. “In most cases, if you waited until you paid off all of your debt before beginning to invest, you could be missing out on years worth of deposits and potential market gains.“

To maximize your earnings, make sure you shop around for your high-yield savings account using an online shopping tool like Credible. Accounts average around 0.9% APR per year, according to the FDIC.