Saving money is a big deal. When there isn’t much left over after each paycheck, the money you do save has to be in the best possible account for you. Here’s what to consider when choosing a savings account:
Type of Account
There are several different types of savings accounts including: basic, club, money market, certificate, retirement, and interest checking. Many people have some or all of these types of accounts and distinguish goals for each. A basic or club savings account can be used for short term goals like a vacation or the holidays while a money market or certificate could be used for long term savings goals like buying a car or home.
After determining the type of account, you’ll want to select the best earning potential for your money. Many savings accounts offer tiered interest rates depending on the amount you keep in the account. Certificates and many retirement accounts lock you in a rate for a specific term but do offer higher rates than a basic account. Search and compare online for the best rates and make sure you monitor your account regularly to avoid teaser rates.
Depending on what you are using the account to save for, you’ll want to find out what type of access you have to the account. Can you withdrawal and transfer funds online and through the ATM? Also, make sure to find out if there are limitations and/or penalties for withdrawals. Sometimes club accounts have limited access in order to “help” you save and that may be one of the reasons for selecting the account.
Read the account’s fine print very carefully to avoid monthly, inactive, balance minimum, transfer and/or withdrawal fees. Monitor your account closely to make sure you don’t incur unnecessary fees.
When choosing your account, make sure that your funds are insured. Credit unions are insured by the National Credit Union Administration (NCUA) while banks are insured by the Federal Deposit Insurance Corporation (FDIC). Both insurance funds are backed by the United States government up to $250,000 per depositor.
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Categories: Finances, Saving