When building your personal financial plan, it is important to understand the different types of savings accounts in order to make an informed decision about where to store your money. According to Business Today, savings accounts come with many little-known benefits to safeguard your earnings and set aside money for short-term spending goals. Although your money will be kept safe in a savings account away from temptation, it will still be available and easily accessible in the event of an emergency with little or no fees for withdrawal. Read on to learn more about the different types of savings accounts that are widely available to choose the right fit for your finances.
Regular Savings Accounts
Similar to checking accounts without the check-writing abilities, regular savings accounts are offered at nearly every bank for easy sign-up in person, over the phone, or even online. As a relatively easy option to establish and maintain, regular savings accounts are designed for creating a holding cell for worry-free finances. Although regular savings accounts usually require a higher minimum balance requirement, most banks allow you to link it with your checking account for easy transfers. Regular savings accounts typically have low interest rates though, so you may want to opt for a more powerful account to make money.
Money Market Accounts
As part of the financial market with very short maturities, money market accounts are highly regarded for being a safe place to invest your earnings due to its high liquidity. Since money market accounts are insured by the FDIC, there is virtually no risk involved in this investment. While most money market deposit accounts will require you to hand over a higher minimum balance at anywhere from $100 to $2,500, the interest will be significantly higher than regular savings accounts. It is important to note that money market accounts do have a limit on how many withdrawals that you can make monthly.
Certificates of Deposit (CDs)
Another popular form of savings accounts is certificates of deposit (CDs), which are savings certificates that allow individuals to receive interest periodically over the lifetime of their investment. Available at most banks with FDIC insurance, CDs have maturity dates that can range from just one month to five years, with longer terms usually paying the highest interest rates. In exchange for having a higher fixed interest rate with a CD, you will have restrictions on when you are able to withdraw. If you take money out before it has reached maturity, you will likely need to pay a small penalty charge.
Automatic Savings Plans
For people who have a tendency to spend rather than save, automatic savings plans can be the perfect option for developing a more healthy habit for saving money. Offered at many banks to help customers gain lower banking fees, automatic savings plans will automatically transfer money from your checking account into your savings account monthly for a specific dollar amount that you choose. While you may find it disconcerting to watch money leaving your checking account each month, most individuals with automatic savings plans enjoy watching their savings account grow monthly with interest.
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Overall, depositing money into a savings account is one of the only ways to truly start a path towards personal finance empowerment. Since there are better savings accounts for different age brackets, according to Bankrate, it is highly recommended that you carefully choose among the different types of savings accounts available to develop a saving strategy that will grow your wealth effectively.