Strategies for Saving – Different Saving Account Options
- Savings
Traditional Savings
A traditional saving account is the basic account that everyone can use to save their money no matter how much. It is recommended that people start financial journey with a traditional savings and put about 20% of their income into their savings.
While you typically will not earn as high on interest with a traditional savings account compared to other savings options, you will have my flexibility with your money. Most banks will allow you to have a savings account with a low minimum balance or even no minimum balance. This allows you the flexibility to withdraw your money if an emergency occurs.
- Easy to open
- You can earn interest and watch your money grow
- Allows flexibility
Certificate of Deposit
A certificate of deposit, also known as a CD, is a great option if you have money you can lock in and leave untouched for a dedicated term. A CD usually offers the highest saving rate, resulting in the higher returns. A CD allows you to earn more money, but keep in mind that the money is locked in for the term for chose. Meaning that you are not able to access it without losing money.
- Higher, Fixed rate interest
- Opportunity to ladder – meaning you can open multiple CDs over time with different terms. This allows you to be receiving dividends
- Fixed term
- Predictable returns
Money Market Savings
A money market savings allows you to earn higher rates than with regular savings. The higher the balance, the more you can earn. A money market allows you more flexibility than a CD because there are no term requirements so you can get to your money at anytime. This savings account is a great option is you have a larger balance to put into it so you can earn more. Check out rates to see if you have a balance that would make sense to put into a money market.
- Great choice in a riding-interest rate environment
- Convenient ATM access
- Easy deposits
- No minimum balance
- Greater liquidity
- Better for an immediate need for cash