Setting aside funds in a savings account is a great way to build financial stability. However, not all savings accounts are created equal, so you may need multiple savings accounts depending on your goals. We’re breaking down the different types of accounts available for your savings to help you make the best choice for your needs.
A traditional savings account is available at most financial institutions. These accounts often have low (or no) minimum balance requirements, earn a small amount of interest, and allow for easy access to your funds. These types of accounts are great for setting aside funds earmarked for specific expenses, like future vacation or holiday spending, or putting aside money you don’t want to have tied up in different savings options that don’t allow you to make withdrawals at any time.
Like a traditional savings account, a money market account can often be found at most financial institutions and may provide a higher rate of return on your deposit. On the flipside, money market accounts often have higher minimum balance requirements, and you could face fees if your balance drops below that threshold. Money market accounts are a great option if you have a larger initial deposit and plan to use the funds for longer term savings, like for a down payment or as a place to hold your emergency funds. At PSECU, our money market accounts have no minimum balance requirement, making it a great account to start your long-term savings. Our money market accounts also earn dividends - the credit union term for interests- on balances as low as $500.
A certificate of deposit (or CD) is a different type of savings vehicle compared to savings or money market accounts. With a CD or certificate, as they’re called at PSECU, you agree to keep the funds in the account for a specific term, usually anywhere from six months to five years, and the financial institution will provide a fixed rate of return during that time. If you withdraw the funds before the term ends, you could face early withdrawal fees or forfeit your earnings, depending on the terms of the certificate. Because the funds are locked in for a specific term, you’ll often see higher rates of return compared to other savings accounts. A certificate is a great option if you have extra funds that you won’t need immediate access to until a future date, like savings for a new car or education expenses.
If you have other goals that are long term, like retirement or paying for a child’s college education, you may want to explore an Individual Retirement Account or a 529 plan as a savings strategy.
When looking at different savings options, ask yourself a few questions before choosing an account. Things to consider may include if the account earns interest, if there’s a minimum balance requirement, or if you’ll incur any monthly fees. While there are many different types of savings accounts, the best option for you will depend on you and your financial needs.
No matter what you’re saving for, we’re here to help. We have savings account options to meet a wide variety of needs and provide peace of mind. Choose the best account for you today.