Saving will always be a very fundamental part of your financial freedom journey. I know that’s how mine started. Knowing that you have that extra amount safe in your account with no threat to it, no responsibility on it. It gives you such power that you cannot believe. Because you know that just in case of anything you are not in trouble, you have a crutch, a safety net that you can fall back to when the waters get stormy. However, saving may not be as easy as it sounds, especially for beginners. So how can you make saving a smooth ride for yourself? Use a savings account that meets your needs. Here is a list of savings accounts and their features, decide for yourself which one is best for you.
1. High Interest Savings Account
This is the kind of savings account that gives you a very high yield on the percentage of what you have already saved. You need to have saved a significant amount of money for you to see this go up significantly. This is the best account to use if you have a financial goal you need to achieve within 2 years or less. A con to this account could be that the interest rates differ so you could be expecting a certain amount and may be a little disappointed if it comes in less. An advantage is that the interest is earned daily so you can see some money come in even if you don’t have much to start with.
2. Money Market Fund
This is a savings account but still, it could be viewed as an investment as well, why? Because when you save with a money market fund there is a return on the money you have saved. This money is compounded and added to the amount that is already there, bringing up your principal amount each time. By the end of a particular period of time, you can even withdraw the interest earned and do another investment with it. Especially if it’s a huge amount that was saved up to begin with. The interest can be paid somewhere from around 4%-10% depending on the institution or bank you decide to save with.
3. Fixed Deposit Account
This is probably the best savings account to have, mainly because it teaches you some sort of discipline, how? A fixed deposit account can be deposited into an unlimited number of times. But can only be withdrawn a particular number of times. For example, you could find that the withdrawal is only once a quarter, that would mean in the whole year you can only withdraw from it only 4 times! Amazing right? Especially if you want to do something significant for yourself or your family. If you do withdraw before the maturity date, there is a penalty. This is meant to deter you from touching the funds before the due date. A fixed deposit account can also serve as an insurance against a loan of up to 95% of what is saved up.
4. Traditional/Regular Savings Account
This is the most common savings account that is known to most people. It is not as special as the rest and it is mainly just for purely saving money. The interest rate is not as high compared to the rest. It is best for those who just want their money stored in a safe place. The best thing is that this is a secure savings account and best for those who like to be a little old fashion with their saving methods.
Related: Savings Checklist
5. Cash Management Account
This is the type of account that enables you to streamline your finances, how? It offers the benefits of all types of accounts under one account. In that, you can save in the same account as well as use the account for other financial duties. You can even connect it to investments that you have ongoing. Another advantage is that it has higher interest rates so if you are saving you have more returns for the money inside your account. The best advantage of cash management accounts is the ease of use with fewer transactions to keep track of.
6. Specialty Savings Account
This is the type of savings account that lets you save for a particular purpose, it is usually even in the name, for example; kid’s savings accounts, retirement savings account. They are mostly long term and need not be touched for a while. They enable you to put aside a small amount for this goal over time and after a few years of saving for the goal you are able to withdraw the amounts saved.
Basically, a savings account earns you money with the fact that the institution that you are saving with, takes your money and gives it to other people as loans or makes investments elsewhere using your money. The returns they get from the investments and the charges on the interest on loans is what makes revenue for the bank and also for you as a person saving with them. Saving is the best practice you can ever master as it is the first step to financial freedom, that and getting out of debt. I hope these savings accounts are able to work for you and are able to meet your needs.