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Savings Account: Which Type Is the Best

Saving is hard, but saving money is even harder. Why? Because saving takes time and discipline, and let’s face it, none of us has that to spare. So, what’s a cash-strapped person saving for their first home, or to be able to move to somewhere like this senior housing in Lincoln community and enjoy their retirement, to do? The most obvious answer is to open a crudely named savings account. But which type is best?

What Is a Savings Account?

A savings account is a financial account that allows you to save money in small amounts, typically with a fixed interest rate. It is typically used for short-term savings goals such as a vacation, home improvements, or an emergency fund. These accounts can be either insured or uninsured.

Here Are the Six (6) Types of Savings Accounts

  • Traditional or Regular Savings Account – A traditional or regular savings account is a savings account that earns interest, usually from banks and other financial institutions. These savings accounts follow FDIC bank deposit insurance rules and typically offer higher interest rates on larger balances. Traditional savings accounts typically offer higher interest rates than money market accounts designed for people looking to keep a small amount of money available for emergencies.
  1. High-Yield Savings Account – A High-Yield Savings Account (HSA) is a tax-exempt savings account that will allow you to put aside funds to pay for eligible medical expenses. To qualify for an HSA, you must have a high-deductible health plan. This generally means health coverage with a deductible that is at least twice as much as your annual household income. The money deposited into an HSA is considered non-taxable.
  2. Money Market Accounts – A money market account (MMA) is a savings account that’s different from a regular savings account. You can’t access your money often (typically more than 6-12 times per year). However, an MMA often has higher interest rates than regular savings accounts, so it’s generally a good place to park the money you want to save, but you don’t want or need immediate access to. With MMAs, your money is FDIC insured, just like with a regular savings account, so your money is in good hands. If you are planning a trip or doing something adventurous that you have always wanted to do, it could be a good way to save money for that. For example, by saving money in this type of account, you could sponsor a trip to a sport such as flying a spitfire through, skydiving, or even a world tour.
  3. CD Account – CD Account is your full-service credit union online and mobile app that provides convenience and control of your accounts. With a CD Account, you can manage your accounts anywhere, anytime, 24/7. An easy-to-find phone number and email address are available 24/7 for any questions you may have. CD Account is free on all accounts, including checking accounts, savings accounts, money market accounts, and certificates. There are no minimum balance requirements, no monthly fees, no per-check fees, and no per debit card fees.
  4. Cash Management Account – Cash management accounts, or CMAs, are checking accounts designed for business owners who deposit larger amounts more frequently. They are commonly touted as an effective means for managing cash flow, tracking spending, and lowering costs. CMAs even offer other potential benefits, such as higher interest, reimbursements for expenses, and preferential rates on loans.
  5. Specialty Savings Account – A specialty savings account, also called a 529 account, is a type of college savings plan that’s designated by a state. These plans are different from regular 529 accounts, which let you save for higher education because you’re able to invest money specifically in specialized programs, such as computer science, architecture, and music. A specialty savings account requires a lot of planning, so you’re confident you’ll have enough money to pay for college.

Why Would You Put Money in a Savings Account?

Here are some reasons why it can make to put money in a savings account.

Saving money can be challenging, but putting money aside is easier when you understand the benefits you’ll receive from your savings account.

  1. Build an emergency savings fund
  2. Reduce your debt
  3. Save for a down payment on a house or car
  4. Make retirement dreams a reality
  5. Make a down payment on another home

Savings accounts are one of the best ways to sock away money. With interest rates occasionally hovering in the zero and low-teens, savings accounts are earning less than they ever have since the recession. However, there’s good news for savers. Some banks are now offering interest rates on savings accounts that rival or even beat pre-recession rates. With such conveniences, your savings may increase with time, which may further help you fulfill your needs after retirement. In case you want to shift to an adult living society (if interested, check out this community) with your retired friends, you can use these savings to purchase or rent a home. Nowadays, hospital bills and medicines generally make a person short on cash, these savings can help you in bailing out of this situation too.

Considering which type of savings account is best for you based on our simple criteria below if you’re looking to save. Along with saving accounts, you may need to invest your money in stocks, bonds, and mutual funds. But you may have to be very cautious while investing in a specific plan. A brief consultation with a financial advisor like Lincoln Frost can help you create numerous passive income sources.

With the implementation of such ideas, you can diversify your income sources along with your job or business. You could further invest your earnings in real estate and precious jewelry (like gold, platinum, and silver). At last, a quote related to the importance of money management-“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship and, therefore, about achieving the good society.” ā€“ Robert J. Shiller.

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