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Savings Accounts for Savvy Savers

Did you know there are several kinds of savings accounts beyond a traditional savings account? Each type of savings account has its own characteristics including fees, interest rates and ways to utilize them. Let’s explore three types of savings accounts and see if they could be the right fit for your financial plan.

High-Yield Savings Account

A high-yield savings account often offers higher rates compared to traditional accounts. What does this mean exactly? Higher dividend rates allow you to earn money just by having a balance in your savings account, which can add up over time. These accounts typically do not charge fees or have any restrictions, making them accessible to all types of savers. Consider using a high-yield savings account for a short-term goal you’re trying to save for, such as an emergency fund, and make sure to check out any dividends you earn each month to see your savings grow.

Money Market Account

Similar to high-yield savings accounts, money market checking accounts offer competitive dividend rates that allow you to make a steady return on your investment. Account restrictions differentiate money market accounts from other savings options. For example, money market accounts have a minimum balance needed to open the account or begin to earn dividends. Depending on the financial institution holding the account, there may also be a maintenance fee or annual charges to keep the account open. Despite this, money market accounts can be a flexible option when it comes to moving and spending the funds. This is because they are often linked to a debit card or even paper checks. Consider using a money market account if you have a larger sum of money saved and want some flexibility with how you access the funds.

Certificates

A certificate, also commonly known as a certificate of deposit or a CD, has the most differences compared to other common ways to boost your savings. The main one? You can put one lump sum of money into a certificate for a predetermined timeframe and leave it until the maturity date, which is the day that you can access the funds without paying a penalty fee. The amazing part? From the time you open the account to the stated maturity date, you will gain fixed compounded interest on the amount in the account. While dividend rates on high-yield or money market accounts are subject to change, once you are locked into a certificate, you’re guaranteed the dividend rate for the timeframe you choose. One setback with certificates is you’re not allowed to withdraw funds before the maturity date without penalty. Consider opening a certificate to help save for long-term goals using funds you don’t need to access anytime soon.

One tip I would recommend when in the market for a new savings account is to shop around and do your research. Look at what different financial institutions offer and analyze what fits best with your financial needs and goals. Happy saving!

Sources:

https://www.bankrate.com/banking/savings/types-of-savings-accounts/#cash-management

https://www.usatoday.com/money/blueprint/banking/savings/types-of-savings-accounts/)

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