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The different types of savings accounts
Learn a little about the different types of savings accounts here!
Saving money is an important aspect of personal finance, and one of the best ways to save is by opening a savings account. A savings account is a type of bank account that allows you to deposit money and earn interest on the balance. However, not all savings accounts are created equal, and there are different types of savings accounts available to choose from. In this blog post, we will discuss the different types of savings accounts and their features to help you choose the best one for your needs.
Regular Savings Account
A regular savings account is the most basic type of savings account. It allows you to deposit money and earn interest on the balance. The interest rate on a regular savings account is usually lower than other savings accounts, but they are usually very easy to open and maintain. Regular savings accounts may also restrict the number of transactions you can make per month.
High-Yield Savings Account
A high-yield savings account is similar to a regular savings account, but with a higher interest rate. Online banks and credit unions usually offer these accounts and can offer interest rates several times higher than regular savings accounts. However, they may require a higher minimum balance to open and maintain the account.
Money Market Account
A money market account is a savings account that typically offers a higher interest rate than regular savings accounts. They are also insured by the FDIC (Federal Deposit Insurance Corporation) and may offer check-writing privileges. Money market accounts may require a higher minimum balance to open and maintain the account, and they may restrict the number of monthly transactions you can make.
Certificate of Deposit (CD)
A certificate of deposit, or CD, is a type of savings account that requires you to deposit a fixed amount of money for a fixed period. In exchange, you will receive a higher interest rate than regular savings accounts. CDs typically have terms ranging from six months to five years, and the longer the term, the higher the interest rate. However, if you withdraw your money before the end of the term, you may face penalties.
Individual Retirement Account (IRA)
An individual retirement account, or IRA, is a savings account that allows you to save for retirement while receiving tax benefits. There are two main types of IRAs: traditional IRAs and Roth IRAs. With a traditional IRA, you may be able to deduct your contributions from your taxes, but you will have to pay taxes when you withdraw it during retirement. With a Roth IRA, you do not get a tax deduction for your contributions, but you can withdraw your money tax-free during retirement.
In conclusion, several types of savings accounts are available to choose from, each with its own features and benefits. Regular savings accounts are the most basic, while high-yield savings accounts offer higher interest rates. Money market accounts and CDs can also offer higher interest rates but may have higher minimum balances and restrictions. Finally, IRAs can help you save for retirement while receiving tax benefits. Consider your financial goals and needs to choose the best type of savings account for you.
Crystal Boyer is VP of Client Success at Plinqit, an app for automated savings and financial education where users are rewarded for both saving and learning. Crystal believes financial education has rippling effects leading to brighter outcomes and life-changing opportunities. As a Certified Financial Marketing Professional, Crystal uses her 20+ years of marketing and banking experience to deploy Plinqit’s services to community banks and credit unions across the United States. Crystal is a graduate of the ABA Bank Marketing School and the Missouri Bankers Association School of Bank Management.