People are delving into all kinds of different financial accounts now. It used to be pretty simple, you had a checking account, that you actually wrote checks out of, and you had a savings account, where you might keep a little bit of extra money for a rainy day.
Saving money today has turned into so much more than just putting money aside. We’ve become so much more aware of our savings and the options we have available to make our money stretch farther.
We don’t want to just stockpile money anymore, we want to use that money to make more money. So, we put it into accounts that give us that added benefit of some earning potential, based on the best money market rates.
Let’s take a look at some of the different types of savings accounts there are now and what kinds of benefits you’ll get with each.
Traditional savings account
Most of us are familiar with a traditional savings account. Your parents may have even opened you one when you were just a little kid. These are great for having somewhere safe to put your money, but the greatness doesn’t go much further than that.
The interest you’ll earn is next to nothing with most of these kinds of accounts. It can be pretty frustrating to have a
We should say though, that some of the online banks are now offering traditional savings accounts that do pay more interest. If you open a high-yield savings account with some of the online banks, you might secure an APY of around 2%.
You do have easy access to the money you have in a traditional savings account though. You are allowed to withdraw or transfer funds up to six times in a month. This limitation is only on transactions occurring online. If you go into the bank in-person, you will not be restricted to a number of transactions. So that is something that can be appealing to some people.
Money market account
Generally, you’ll get a higher interest rate from a money market account. There are some stipulations that can come with these accounts though. You may have to maintain a minimum balance in the account. Many of them require a minimum of $1,000 to stay in the account at all times. Otherwise, you will have to pay some amount of a monthly fee.
The rates for money market accounts will vary from bank to bank. Take a look at some of the best money market rates for currently offered accounts.
When you’re looking for a money market account, you should also look at how easily you’ll be able to access the funds you put into that account. You can find some of these accounts that allow you to write checks off of the account or even use a debit card. Keep in mind though, this is not a checking account, so the six transactions a month limit does still apply to this kind of savings account.
Certificates of deposit
Certificates of deposit, or CDs, work a bit differently than the other two accounts we mentioned above. With these kinds of savings instruments, you’ll usually get much better rates, but the money you put into the account is untouchable for the term of the CD.
The terms of the CDs will vary in length of time. The longer the amount of time is, the higher the interest rate will be. You just have to agree to leave the money alone until it reaches the agreed upon term date. If something should happen that causes you to have to take the money out early, you will probably end up paying a pretty hefty fee for the early withdrawal.
CDs offer you a safe way to earn some decent interest on your savings. Check out the rates for CDs being offered by online banks. That’s usually where you’ll find the highest levels of interest.
The accounts above are great for savings that you want for emergency funds, rainy day savings or putting aside money for vacations or holidays. But what about saving for the long-term?
If your employer offers a retirement plan through your work, then you need to sign up for that. If you don’t, you’re likely leaving money on the table, and that’s just not very smart.
Whether you participate in an employer-sponsored retirement plan or not, it’s still a good thing to do to open your own retirement account. You can open an IRA with your primary bank, or go online and look at different IRAs offered with different financial establishments.
Saving for retirement is something that people shouldn’t wait to do. The earlier you get started, the better off you’ll be.
Save more than just what you’ve got
Saving is about much more than what money you’ve got left over from your paycheck. Now it’s about what you make on top of that money in interest. Look for a savings account that will allow you to make more money with the money you have so you can get the most out of your savings.