With so many ways to save it can seem overwhelming trying to determine the best savings account. Given the amount of money your account can potentially earn, it’s a pretty important decision to make.
Compare savings at moneysupermarket to get a better idea of the amount of interest you can earn with each type of account.
A regular or basic savings account is what you want linked to your checking account. This is the best account to have on hand for emergencies.
The best thing about regular savings accounts is that you have unlimited access to them immediately. Some banks may have a limit on the number of withdrawals and transfers you can make during any given month, but that money is essentially yours to use whenever and however you see fit.
The downside of a basic savings account is that it doesn’t earn compounded interest like other accounts.
You won’t see a noticeable increase in your balance due to accumulating interest, although you can open a regular savings account with an institution that provides higher interest on basic accounts, such as a credit union. Even so, the amount of interest you earn will be minimal.
Whether or not you plan on investing in accounts that provide higher interest, a basic savings account is a must-have for everyone.
To accumulate more interest, look into a money market account. These come with a higher interest rate than regular savings accounts and will change as the economy changes.
Although you may not earn much interest in a recession, keeping a balance in a money market account will make your money grow over a long period of time.
You also have easy access to a money market account and can withdraw whenever you want, although you will be limited to the number of withdrawals you can make. This will vary by financial institution.
If you plan on opening a money market account, shop around to compare interest rates. Each bank and credit union will vary on the amounts of interest they currently earn, as well as the minimum balance requirements.
Money market accounts are ideal for people who want to dabble in minimal, risk-free investing as well as maintain easy access to funds.
Anyone wanting a more tangible savings investment can go with a certificate of deposit (CD). CDs require you to leave a specified amount of money in the account for a specified amount of time.
CDs come with maturity dates, which is the date on which you can withdraw the funds. If you withdraw before the maturity date you will be subject to a penalty.
CDs have higher interest rates than any other type of savings account, making them perfect if you want to accrue interest earnings over a specific period of time. They are also the most straightforward type of investing so you don’t need any knowledge of stocks or investment strategies.
