In this day and age, the mutual fund, the various brokerage accounts, IRAs, and retirement funds have made savings accessible to millions. Even the passbook savings account has matured, and now, those with even as little as a couple of thousand dollars can realistically save.
Three of the more popular savings accounts are the online savings, term deposit, and money market accounts. While term deposit and money market accounts have more stipulations, they tend to yield higher interest rates. All of them are great choices depending on your financial goals.
Keep reading to learn how you can get the highest returns on some of the more popular types of savings accounts.
How Online Savings Work
Online savings accounts are saving tools that allow individuals to save money at higher rates. Online savings accounts are different than your standard ones because they yield more interest than passbook accounts. Also, regardless of the amount deposited there are no fees to manage the account.
Furthermore, there are no fees assessed for making withdrawals. In addition, these accounts are federally insured for $250,000. Typically, the rates can run anywhere between 1.5 and 3 per cent in interest. The only drawback to using an online savings account is that some might not have ATM access
Of the types of savings, this one is more flexible in that there are no minimum balance requirements. Additionally, these savings accounts are great for people who want to save but also need access to their money. In addition, you can essentially have allotments deposited in the accounts, i.e. payroll.
How Term Deposit Accounts Work
Also known as a certificate of deposits (CDS), term deposits allow individuals to deposit at minimum $1,000 in an account to mature later. Of the types of term deposit accounts available, there are short-term, long-term and ladder accounts. While their maturities vary in length, savers usually use these accounts to save for a specific purpose, i.e. home.
Also, while there are fees assessed for early withdrawals, there are no management fees assessed to maintain this account. Term deposits accounts are also federally insured up to $250,000. The rates for these tend to be between one and two per cent in interest.
Those who opt for this type of account usually have a specific financial goal in mind. For this reason, these accounts cannot be accessed for some time. With short-term accounts, the time can run between one and five years, and long-term accounts are longer than five years. Either way, people who open these accounts want to use the money for a specific reason.
How Money Markets Work
A money market account is one that yields interest but comes with cheque and debit privileges. Money markets usually require higher minimum deposits, but their interest rates are higher than standard savings accounts. While you have to deposit more money, the benefits of these kinds of accounts are numerous.
One of the central benefits is you have access to your money with some money market accounts allowing you to make an unlimited amount of withdrawals. Like the other account types, these are also federally insured. Finally, they are easy to access, but there are factors potential account holders should keep in mind.
First, some accounts have a limited number of withdrawals, in addition to minimum balance requirements. Usually, those who need quick access to their money in case of emergencies or those budgeting for tax payments or tuition benefit from these types of funds. In essence, if you need access to your funds but want higher interest than standard savings, your money market account is the way to go.
Making Money Earn Money
These are just of the few ways you can capitalise on interest. These three bank accounts are great ways to save for both short and long-term goals. However, the best way to guarantee you get the most for your account is to shop around for better rates.
