Opening a savings account at a bank or credit union is a great way to help you save for short term goals and for those unexpected expenses.
Common savings options include:
Traditional Savings Accounts
Traditional savings accounts offered by banks or credit unions are easy to open and give you easy access to your money. They normally pay a small amount of interest, but are safer than storing your money under a mattress since they are insured by the federal government. Shop around to find the best interest rate.
Money Market Accounts
You often need anywhere from $1,000 to $10,000 to open a money market account. You typically earn more interest in a money market account than in a regular savings account, but you might only be able to withdraw funds a few times a month. Depending on where you open your account, it may or may not be insured by the federal government. Be sure to ask.
Certificates of Deposit
Certificates of Deposit (CDs) tend to pay higher interest than a traditional savings account. With a CD, you agree to “lock up” your money for a set period of time. At the end of that period, you get your money back plus interest. If you withdraw your money early, you’ll pay a penalty. CDs that are bought from FDIC insured banks or NCUA insured credit unions, are covered up $250,000.
Things To Consider When Choosing A Savings Account
- Does the account help me with my savings goals?
- Are there monthly fees or service fees and can I afford them?
- Is there a minimum balance requirement?
- Does the account earn interest and how much?
- How easily can I access my money in the account?
- Does the account have check-writing capabilities? Do I need check-writing capabilities?
- Are there transaction limits on the account?
- Is the financial institution insured by the FDIC or NCUA?