Savings Accounts 101
There are a few different kinds of savings accounts, all with different kinds of benefits and possible downsides. Selecting the correct kind of savings account is an important decision for healthy finances.
Regular Savings Accounts
A savings account can simply be a place to hold money and earn interest. You can take the money out when you need it, though there are some limits on how often you can withdraw, however there are unlimited deposits. Typically you would open a basic savings and checking account at the same time at the same bank. There may be fees and a minimum balance associated with this kind of account and the interest, depending on the bank, can be rather low in comparison to other kinds of savings accounts.
Online Savings Accounts
Offered by both brick-and-mortar banks and online banks, these online savings accounts typically have better interest rates than your plain Jane basic savings account through your local bank. Fees and minimum balance requirements are less common with these kinds of accounts. A downside is that you do have to do most of, if not all of your banking online. These kinds of accounts also have unlimited deposits and a limited amount of withdrawals.
Money Market Accounts
Money Markets accounts are an interest bearing account that commonly have higher minimum balance requirements than a regular or online savings account and may have associated fees as well as a limit on withdrawals. Owing to their FDIC insurance, Money Markets are considered to be a basically risk-free investment and an overall safe place to put your money. Money Markets are offered by most banks and financial institutions.
Certificate of Deposit (CD)
CD accounts generally have a higher interest rate than other kinds of savings accounts but the funds are not readily available. How long you are unable to withdraw the funds depends on the type of CD you buy. The primary reason for choosing a CD would be the high interest. CDs are also FDIC insured.