Almost all financial experts agree that saving money is essential in today’s unstable times. In the blink of an eye, you could be involved in a car accident or have an expensive medical emergency. Savings accounts are a great way to ensure that your money is safe while earning a small amount of interest.
Although some banks have minor restrictions on a savings account, they can be opened by almost anybody with an identification card. Note that there are 3 main savings accounts you can choose from.
A basic savings account is what it sounds like: a basic savings account. These are the common accounts you see banks offer to consumers. While there is interest that accrues in your savings account, its not much. Interest rates can be as low as 0.01% with some banks. However, your money is easily accessible and liquid with a basic savings account.
You may have seen various commercials on TV talking about CDs and how they pay more interest than traditional savings. CD stands for Certificate of Deposit. Depending on the lender, you can find rates from .1% up to 1% interest.
With almost all CDs, you must keep your money with the bank for a certain length of time. In other words, you cannot withdraw the money from the CD early. You can find CDs with a range of 6 months up to 1 year. If you do need to withdraw money, expect to pay a fee.
If you are looking for a slightly aggressive savings strategy, a money market fund may be best for you. Although you do need a higher amount of money to deposit initially, you will see a much higher return on your money. With money market funds, you can also withdraw your money at any time.
If you want to grow your savings with a money market fund, its recommended that you have at least $1,500 saved and ready to deposit. Most institutions do charge fees on money market funds, but the fees can be reduced with a larger deposit.
All in all, having a savings account is a great way to protect your money. The 3 common types of savings funds are relatively liquid and transparent. No matter which type of savings account you want, the process is simple. There are thousands of online brokerages and banks that will try to compete for your business. Be sure to do in-depth research to see which savings strategy is best for you.