Choosing a Savings Account
Do you save on a regular basis? It's a smart idea to consider. In fact, putting away a nest egg can keep you in good financial shape in a number of ways. Paying emergency bills and unforeseen fees with money from your savings instead of sacrificing your budget could possibly save you from financial difficulty. Saving smart could also allow you to plan for larger purchases, such as a new car or college education; it's up to you and your personal savings goals.
But once you've set goals, what kind of saver will you be? There are many different tools out there for you to use to boost your savings plan. You may prefer a system that allows immediate access to your funds, or you may want to store your cash somewhere with limited access and a high interest rate. We've provided information below about some of the more popular types of savings accounts so that you can make an informed decision about which one is right for you.
Types of Savings Accounts
There are four main varieties of savings accounts available:
- Passbook Accounts and Statement Accounts. Generally known as “deposit accounts,” these are the most common forms of savings accounts available, and are most likely provided by your local bank. With a passbook account, the bank provides you with a booklet, and it is your responsibility to monitor deposits, withdrawals, and accumulating interest. A statement account puts the job of reporting in the hands of the bank, which will send you a statement once a month that details all interest and transactions that have occurred in the account.
Deposit accounts are liquid accounts, meaning that you may withdraw funds from them at any time, either at your local branch or from an approved ATM. The Federal Deposit Insurance Corporation (FDIC) insures your deposit account for up to $100,000. You'll usually see few if any additional fees, but in exchange, you'll likely receive a very low accumulating interest rate. You'll also be limited by federal law to six transfers of money to or from the account per month.
- High-Yield Savings Accounts. These accounts are becoming more and more common as people are deciding to be more proactive with their savings, though they may be a bit more of a challenge to find than a deposit account. Like a deposit account, high-yield savings accounts are also liquid and insured by the FDIC, and you can usually link these accounts to your standard checking account for easy transference of funds. What makes these accounts stand out is the high rate at which your savings will earn interest, allowing your deposits to grow much faster than traditional savings accounts.
- Money Market Accounts. Not to be confused with a money market fund, a money market account could be considered the best of both worlds for your savings goals. It too is a liquid account, allowing you to withdraw funds whenever you like through checks, transfers, and ATM transactions. Money market accounts generally have high interest rates and are FDIC insured. However, in exchange for earning an average of twice the interest than a standard deposit account, money market accounts sometimes require a minimum balance to avoid penalty fees.
Want to learn more about saving your money, or how to make it work better for you? We can help. Take a look at our About Savings Accounts section to learn more about how to decide if a savings account is right for your financial situation.
