What are Options for Saving Money?
Choosing where to save your money is almost as important as saving it. The best type of account to use will depend on how much money you'd like to deposit, how fast you want to grow it with interest and how accessible you need the money to be. Throughout your life, you'll likely find different types of accounts will work best for different things.
💡 Pro Tip: Look for accounts with few or no fees (such as minimum balance, maintenance, or transaction fees). Fees add up and may chip away at your savings balance on a monthly or annual basis.
Traditional Savings Account
Money is easily accessible in a regular savings account and typically requires a lower minimum initial deposit. You may earn interest on these accounts though some banks may require a minimum amount in your account for accrual to begin. The interest is usually lower than a high-yield savings account, certificates of deposit or a bank money market account.
Certificates of Deposit (CDs)
Certificates of Deposit are intended to hold a fixed amount of money for a fixed period. While these accounts usually offer higher interest rates than traditional savings accounts, your money is not as accessible because it must remain in the account for a fixed period, usually referred to as a "maturity period." Typical maturity periods are six months, one year, and five years. However, some financial organizations may offer occasional CD specials with shorter periods like one month or 90 days. Withdrawing funds from a CD before this period ends may result in a penalty fee.
Money Markets
Money Market Accounts may require a minimum initial deposit. You typically must maintain a minimum balance, and may be limited on the number of certain types of transactions allowed in a month. If you exceed the transaction limit, you could be charged an "excess transaction fee" or be asked to convert the account into a checking account. Money Market Accounts typically offer lower interest rates than certificates of deposit, but the cash is more accessible.
IRA Savings Account
An IRA Savings Account is a tax-deferred account that allows you to save gradually for retirement. Since the IRA is held at the bank it is FDIC insured and is safe from stock market dips, but you still get the tax perks. These accounts will have a set interest rate that’s higher than a regular savings account. This product is tied to both bank and IRS tax laws. Minimum opening balances and transaction fees will vary by bank. A Federal tax of 10% may apply if withdrawn before age 59½.
A personal banker is a great resource if you're just getting started and exploring your savings options. If you want to start thinking about long-term savings and retirement, consider meeting with our Brokerage Services team.
Disclosure:
The information provided is for educational purposes only and is not intended to provide specific financial advice or recommendations.
