There are different types of savings accounts, and the key to getting the right one for your needs is understanding what you have to choose from. If you aren’t sure what your options are, it’s very hard to pick the right one. By being informed though, you can select the right savings account and get what you expect from it, whether you’re just starting out or you want to add another way of saving to the financial plans you already have. Either way, choosing the right method of saving your money depends on your situation and level of money to save, along with how you plan to use that account and the money in it in the future.
Regular, or Standard, Savings Accounts
These are the common types of savings accounts that every bank offers. Sometimes, people have them separately, but more often, they get one when they get a checking account. That way, they are able to have some money in both and transfer money between the two. It can help them keep track of their money and take some of the money out of their checking to put aside in savings without much difficulty. Most of the time, these accounts earn little-to-no interest. However, they are good for having some liquidity and for having quick access to cash if and when it is needed. They can be good choices for that reason.
Automatic Savings Plans
For people who struggle to save money and tend to spend it instead, automatic savings plans are worth considering. In general, these take every purchase you make with your debit card or by writing a check, and they round it up to the next dollar. The difference is deposited into a savings account. While it may not seem like much, it can add up very fast. If you choose this option, it also makes balancing a checkbook much easier, because it is all round numbers, and you can quickly see if there’s a problem. Additionally, some of these savings plans come with accounts that do offer a small rate of interest, so they can be good options in that they’ll help you save and also help you grow your money a little bit.
Time Deposits (TDs) and Certificates of Deposit (CDs)
A Time Deposit (or as is generally called a CD, or Certificate of Deposit), is another way to save, but it does come with some restrictions that are important to consider. First, it offers a higher rate of interest than a savings account will, so you’ll make more money when you choose this option. Second, it has a set period of time that you have to leave the money in it. Most CDs start as low as three months on the time period and can rise to five years or longer. You can decide which option is right for you, depending on what the bank offers, but you’ll also need to consider that the longer-term CDs have the highest rates of interest. The longer you give up the use of your money, the more money you’ll make. Just be sure you can afford to put that money aside for a while, because if you need it before the CD comes due, you’ll have to pay a penalty to get your money back. That can have you losing ground financially, instead of gaining it.
Money Market Accounts
A money market account is another way to save, which provides a more flexible access to your money than a time deposit. In a money market account, you simply put the money into one account. Then it gets invested, so you don’t have to worry about it. Most of these accounts promote a particular rate of interest, and some of them have a range to consider, instead. With that in mind, you’ll want to shop around for yours and make sure it’s the right investment option for your needs.
Disclaimer: The information contained in this article is for general information purpose only and is not intended to be a source of investment advice with respect to the material presented. The ideas contained in this article should never be used without first consulting with your financial/tax/legal advisor.