Savings 101: Breaking Down the Basics to Help You Save
For those interested in saving money but unsure of where to start, let’s examine some account options. Whatever your savings style, there’s a product available to fit your needs.
Saving money can be a challenge for many these days, but finding the right account to fit your needs can be half the battle. Should you keep your money in a savings account or open a Certificate of Deposit? And what’s the difference? Let’s take a look at the benefits of each account.
Separation with accessibility
Savings accounts range in type from the most basic to premium accounts that offer a higher interest rate. There are even specialized accounts, such as Holiday Club, that allow you to save all year long and have your funds automatically disbursed to you in time for seasonal shopping. Or you can designate a regular savings account to use for whatever purpose you like, such as saving for a vacation. Regardless of account type, savings accounts allow you to earn a return while still keeping your money in an accessible account. And while they’re not tied directly to your debit card use, you still have the option to set up overdraft protection to your checking account for peace of mind, or withdraw the funds as you need them. These accounts allow you easy access to your money, while keeping enough separation for you to be able to save as it fits your budget.
Higher returns for restricted access
Certificates of Deposit are better for long-term savings plans. The minimum balance to open a certificate is $1,000 and you can select terms as low as three months and up to five years. Once you open a certificate and deposit the funds, you are locked into the rate and your funds are also locked up, in a sense. You are not able to make deposits to a certificate and withdrawals come at a price. You can still make a withdrawal from your certificate should you need to access your funds; however, doing so will cause you to forfeit the interest you’ve earned which is rescinded in the form of an early withdrawal fee.
It’s all about your style
What it all comes down to is flexibility and personal preferences. Savings accounts allow you to start with little and put aside as much as you like, or are able to, over time. You can even set up an allocation from your direct deposit to go directly to your savings account – making saving as easy as “out of sight, out of mind.” However, if you’re able to start with a larger amount of money, opening a certificate will earn you a higher interest rate for essentially locking up your funds without touching them. But whatever you’re comfortable with – whether you’re a casual saver or more conservative – there’s bound to be a product or method that fits your style.