by Amy Lillard
(2/15/2013) Saving money is one of the simplest and most effective ways to gain control over your finances. Whether building up a safety net for protection against losing a job or sustaining an injury, or saving towards specific items like cars, homes, or vacations, saving regularly can ensure you're ready for any financial situation, providing an invaluable feeling of security.
Today financial institutions are helping consumers save, and providing ways to maximize that money. Through deposit accounts, savers can easily contribute to their savings and even add to the totals over time through interest. There are multiple types of accounts to choose from, depending on your savings purpose and specific needs.
• Savings accounts. The simplest of the bunch, savings accounts are a common counterpart to checking accounts. They provide a means to store money in your bank and receive a small amount of interest in return. Most savings accounts have no requirements on how much money you must start with. There are a few rules or restrictions on accessing your money, typically around how many withdrawals you can make a month, but there are no fees for doing so. Typically, savings accounts are good for those seeking an easy method of savings that can be accessed quickly.
• CDs. Certificates of Deposit (CDs) are an advanced version of a savings account. Savers put money into the account for a specified period of time (maturity date), and in return they receive a guaranteed rate of return in the form of a fixed interest rate. There are multiple terms to choose from, ranging from a week to 10 years. The longer savings terms will provide much higher interest. The drawback here is lack of access. Savers cannot withdraw the funds from their CD before the term is over without incurring severe penalties, usually in the form of several months of interest.
• Money market accounts. These type of deposit accounts are geared towards higher sums. They feature a high minimum account balance, and in exchange pay higher interest rates than regular savings accounts. In fact, some accounts may offer a scale of interest based on how much money is in the account. However, the interest rates will vary over time, in contrast to a CD's fixed interest rate. Consumers can access the money in these accounts much like a regular savings account, with a certain number of withdrawals allowed each month.
To learn more these types of savings accounts, check back with eRate for additional articles exploring each.
For Additional Reading:
FDIC: Your Insured Deposits
How Do Savings Accounts Work?
5 Types of Accounts Typically Offered by Banks: http://www.investorguide.com/article/11655/types-of-accounts-typically-offered-by-banks-igu/
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