Saving money is something that most of us wish we were better at. But unfortunately, no matter how hard we try to save money, life gets in the way. When we have paid our monthly bills, bought groceries, and spent a little bit of money on the fund stuff, it often feels like there isn’t much left to save.
Fret not; you are most likely not suffering for this alone. There are millions of people worldwide that find themselves in the same predicament. Learning and understanding the 3 most standard savings accounts can help you establish a solid money-saving strategy for yourself.
While the digital savings product has started taking over the conventional savings accounts, still, the 3 most standard savings accounts popular among people today include savings accounts, money market accounts, and certificates of deposit (CDs).
We will tell you more about each of them and any considerations you’ll need to consider when choosing any of those account types.
Savings accounts are exactly what they sound like – an account that allows you to set aside your money for safekeeping securely. You can also earn interest by leaving your money in the account.
Savings accounts aren’t usually linked to a payment method such as a debit card or checkbook. However, you can connect it to help provide you with overdraft protection.
A savings account’s central concept is to disturb your money as little as possible and allow your savings to grow. Of course, you can use the funds from your savings account when you need them, but you should do so sparingly.
Money Market Accounts
Money market accounts can be considered the best of both worlds as they are similar to savings and checking accounts.
Just like a savings account, money market accounts also earn interest. But, in this type of account, you will most likely have the option to get a debit card and/or checkbook.
With money market accounts, you will have much more control and easier access to your funds than a savings account.
Another main benefit of a money market account is that it allows you to earn higher interest than a conventional savings account. But, money market accounts may have higher balance requirements to earn that higher interest rate.
Certificates of Deposit (CDs)
Certificates of the deposit is a savings account with a minimum deposit or a balance requirement, similar to money market accounts.
The thing that makes certificates of deposit accounts unique is that they have a maturity date. It means you have to leave your funds in the account until a specific date when the CD is considered mature. You’ll have to pay the penalty for early withdrawal if you don’t.
The longer your funds stay in the CD accounts, the more interest you’ll be able to earn. So certificates of deposit can be the right choice for people who want to make some interest on their savings in a low-risk way. But they’re best when you don’t need immediate access to those funds.