Saving money is often considered a blanket term — conjuring images of coins clanking into a piggybank, stashing cash under a mattress, and, of course, the traditional bank account. But there are so many ways to save, and how you choose to store your money should depend on your own specific situation and goals.
Are you starting from scratch, or are you looking to secure funds? Do you want the ability to withdraw money whenever you need it, or can you lock funds away for longer periods of time and potentially earn more interest?
There are three major types of savings accounts that you can open at a bank or credit union: traditional savings, Certificate of Deposit (CD), and money market accounts. Below, we’ll take a look at all three types of accounts so you can weigh the pros and cons of each to decide which is best for you.
For secure storage: Traditional Savings Account
How they work: A savings account is intended for depositing funds and keeping them there, as opposed to a checking account where frequent transactions are made, with money consistently moving in and out. Many savings accounts also earn interest, though rates are generally very low. For example, as of November 2024, the national average reported by the Federal Deposit Insurance Corporation (FDIC) was 0.43%, but these rates change often. High-yield savings accounts, typically available from online banks, offer slightly higher interest rates.
Good for: Savings accounts are good for every type of saver. They are a safe place to keep your money since they are insured (up to $250,000) by the FDIC. One common savings strategy is to automate small deposits from your paycheck into your account so that it grows. Some people consider savings accounts as “rainy day” funds to have in case of an emergency, while others use them to save toward a specific goal or event.
What you should know: Savings accounts typically do not have checks or debit cards, and are not intended to be used on day-to-day spending. Depending on the account setup, withdrawals may be limited, though some permit account holders to easily transfer money into a checking account for more frequent use. Be aware that some may require you to maintain a minimum balance amount in order to avoid monthly fees.
Depending on the account setup, withdrawals may be limited, though some permit account holders to easily transfer money into a checking account for more frequent use.
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