There are different types of savings accounts to choose from for your hard earned money. Whether you are looking to save money for a new car or go on a dream vacation, these goals are within reach. You just need some focus, dedication, and the right information.Did you know there’s more than one type of savings account? If you’re trying to save money and achieve your personal financial goals, then you’ll want to know about all the different types of savings accounts. Each have their own benefits and drawbacks. In this article, we’re going to discuss the three main types of savings accounts so you have a better idea of which may be the right one for you.
Different types of savings accounts explained
Deposit savings accounts
If you already have a savings account, it is likely a deposit savings account. These accounts are also known as transactional savings accounts and they are a simple way to earn interest on money that you store in a bank or credit union. Many people enjoy taking advantage of deposit savings accounts because they often require only a small minimum deposit and have high liquidity. This means that you can easily transfer your money to a checking account when you need it. The drawback of keeping your money in a deposit savings account is that they usually doesn’t yield a high interest rate. However, some online banks today offer higher interest rates than brick-and-mortar banks. Before you decide to put your money in a deposit savings account, you should shop around for the best interest rate.
Money market accounts
In some ways, money market accounts are similar to deposit savings accounts. However, the major difference between money market accounts and deposit savings accounts is that money market accounts require a larger minimum deposit. In addition, some banks will charge a fee if that balances dips below a certain amount. The trade-off is that you’ll most likely earn more interest on a money market account.If you’re trying to build an emergency savings fund, then you may want to consider putting your money in a money market account. This type of account works well since they allow you to write checks against the balance. That means you don’t have to wait for your savings to transfer to your checking whenever you want to use it.
Certificates of deposit
With the highest interest rates of the three types of savings accounts, certificates of deposit or CDs have low liquidity. This means you have to keep your money in the CD for a specific period of time before you’re allowed to touch it. Some of the best CD interest rates today are between 2.5% and 3%, but you can incur major fees if you try to withdraw the money before the CD has matured. CDs are an excellent choice for people with extra money they won’t need to use any time soon.
Which Type of Bank Account Is Right For You?
There are plenty of places to store your hard earned savings. In order to determine which would be the best fit for your personal finance situation, you need to give thought to a few things.
How much is the initial deposit requirement?
How much access do you need to your money?
What are the possible fees you could be charged?
Can you write checks against your balance?
What type of interest will you be earning?
By asking yourself these questions, you will have a better idea of the type of account that will best meet your needs. With the right type of account, saving for your future will become a lot easier.
Now that you know about the different types of savings accounts, which do you think are right for you?