This is a guest post by Jennifer from Money & Finance blog
Saving money has never been more important to your financial well being. Whether you are planning for retirement or simply saving money for the likelihood of a rainy day, you have several options available to you. However, you should not choose any option until you understand the kinds of savings accounts available to you. What options do you have? How can you ensure that your savings are available to you? Finding the right type of savings account will do much more than provide you with secure access to your money. You will also find options that help your wealth grow.
Your Basic Account – You can open a basic savings account with almost any bank. These accounts offer low interest rates on your funds, so expect slow growth. However, there is no risk with this type of account, so it can be a viable option for consumers anxious to avoid the risks inherent to other types of investment options. In addition, you will have immediate access to your funds whenever you need them. [Note by: Ray] These types of accounts should not be used for long term plans such as retirement, they are good for emergency accounts or any short term savings.
Online Savings Accounts – These kinds of savings accounts are somewhat new. Usually offered by online banks, however you will find them offered through big name national banks as well. With online savings accounts, you can expect to earn a bit more in interest, but also expect to have some limitations on how often you can access your money. If it is with an online bank where you do not have a checking account it can take several days to transfer funds between institution, however if you have a checking account with the bank as well transfers can be done immediately.
High Yield Savings Accounts – These accounts offer higher interest rates than basic accounts or online savings accounts, but the tradeoff is that you are more limited on the number of transactions available per month. You may also find that the minimum balance required is quite high, but these are excellent choices if you want decent growth potential and won’t want access to your money on a regular basis. High yield savings account have changed over the last little while and now are more accessible, but do your research on them before depositing funds with them.
Money Market Accounts – These kinds of savings accounts can be tremendous financial tools for your needs. They offer potential higher interest rates than almost any other type of savings account and those rates can sometimes increase with the amount of funding in the account. However, these have very stiff usage limitations, and frequently have penalty fees that must be paid on specific withdrawal percentages. [Note by: Ray] Money market funds are not as accessible as other savings account described earlier, usually the good money market accounts require a very large minimum amount, such as TD and RBC premium money market accounts require minimum of $100,000. Money market accounts can also be a great tool to use if you have a lump sum and want to dollar cost average in the markets.
Finding the right type of savings account can offer you a wide range of benefits.You will find options for solid, but slow, growth, as well as options that provide you with faster wealth aggregation. You must choose the option that fits your needs best, as well as determine just how much access you will need to your money.
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