You’ve got a savings account. Good for you!
But have you ever stopped to wonder if you have the right savings account?
Because here’s the thing: There are different types of savings accounts and they each have different benefits to offer in terms of access and interest rates. For instance, you could potentially get a lot more from your money just by putting it in the right kind of savings account.
So, what are the benefits of different types of savings accounts? And how do you choose which one is best for you? Read on, savvy saver!
1. Traditional Savings Account: Return + High Access
A standard savings account gives you a safe place to stash your cash. You can (typically) take it out any time you want. But you won’t always get the highest rate of interest.
Here are a few simple saving hacks to help you win the savings game with a standard savings account:
- Shop for a competitive savings account. Be sure to consider all aspects of the account when you weigh your options: the interest rate, minimum balance requirements, fees and account features. Because credit unions are member-owned, their savings accounts can sometimes deliver better rates and lower fees than you’ll get at a for-profit financial.
- Use automatic savings deposits to trick yourself into saving money every month. Set up your account so there’s an automatic transfer to savings the minute your paycheck hits. Once you set it up, you probably won’t even miss that money and you’ll be getting closer to your financial goals without even lifting a finger – seriously!
- Set up multiple savings accounts to put money toward different priorities. Save for a big trip or finally start one of those emergency funds that you keep hearing so much about. Set up automatic transfers from your paycheck and you’ll hit your goals in no time!
With Summit, you can open a primary or secondary savings account with as little as a $5 deposit, and you’ll earn dividends on balances of $25 or more. Plus, you can track your progress toward financial goals using our free Climbr® online tool. Now that’s what we call smart saving.
2. Money Market Account: High Return + High Access
A money market account is a nice saving option with the potential to earn a higher rate without losing the unlimited access. You get the benefit of a higher savings rate, but you can still access your money in a pinch if you need to. One thing to keep in mind is that these accounts typically require a minimum deposit to open ($2,500 if you’re banking with Summit), so they’re ideal for when you’ve already built a nice cushion of savings (like that emergency fund you’ve been working on!). And when you open a money market account with Summit, there are no minimum balance requirements or withdrawal fees. You can even write an unlimited number of checks each month. It’s the best of both worlds!
3. Certificates: High Return + Lower Access
If you’re trying to build your savings and want to avoid the temptation to spend it, a certificate could be the way to go. Why? Because you won’t be able to touch your funds for a certain amount of time without paying a fee.
You might also hear this referred to as a “certificate of deposit” (aka a CD) at a traditional bank, and the two are effectively the same.
A Summit Certificate is a great way to set money aside as you save up for big, life-changing purchases, like a house or your kids’ education. It’s also a good option if you aren’t quite comfortable investing in the stock market because it’s totally safe (i.e., you won’t lose any of your initial investment), but you still get a higher savings rate than a traditional account. Can you say win, win?
Bonus: With a Summit Certificate, we’ll waive early withdrawal penalties if you get a Summit home loan, and you can always convert your certificate to a retirement fund if plans change (isn’t it nice to have options?).
Setting up any kind of savings account is a great first step—give yourself a pat on the back! But knowing how and why to use different types of savings accounts can help you take control of your money and start working toward the life you really want.
As always, we’re here to help! Schedule an appointment with a Summit financial coach to talk savings. Save on!