Most people think of savings accounts as the
“one-size-fits-all” accounts offered through their local banks. Actually, when
putting away money, you have a lot of options these days. You need to
learn about the different kinds of accounts, to determine what is best for your
and your family.
First is the traditional savings account, usually through your local bank or credit union. Banks are FDIC insured, which means the government is insuring you will not lose your savings. Typically, you can open an account with a small amount of money.
You have easy access to your money if it is through your local bank. The major disadvantage is a low interest rate of return. Every month you will receive a statement through the mail or email, depending on your preference.
Secondly, there is the twist on the traditional account. This is the online bank account. Online you will often
get a much better, competitive interest rate. Be sure the bank you choose is
FDIC insured. Some online banks require a higher amount of money to open an
account than a traditional bank would.
Next is the CD or Certificate of Deposit. This is the best option if you have money to put away for a period of time, that you will NOT need immediate access to. Usually this money is deposited for a minimum of six months to a year. If you withdraw early, there is a big penalty fee.
CD’s often accrue interest at a higher rate of return than a normal
savings account. They are available through brick and mortar banks or online,
and are insured by the FDIC.
Fourth is the money market account. This requires a higher minimum deposit to open the account, but the interest rate is higher. You are also usually required to keep a minimum balance (amount of money) in your money market.
Consumers can access their money market and withdraw by check (typically, you may write a certain limited number of checks a month). Once again, money market accounts should be insured by the FDIC.
A final savings tool that is often overlooked is the US Savings Bond. This bond is government-issued (therefore, nearly risk-free) and you can usually get them at your local bank. The downside to US Savings Bonds is that they often take a long time to mature.
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Look closely at all your options when considering how and where to save your money. Part of debt-free living is storing some cash away for a rainy day, so be wise about where you put it.