Good financial planning involves making some provision for your future while paying for your present. That means putting some money away in savings so that you have a stronger amount of financial resilience.
One of the biggest dilemmas when deciding to save is choosing the right type of savings account for your needs.
Rates and terms vary so greatly. That is why you often need some help finding the best savings accounts for your needs.
Here is a look at the different savings account options you can choose from.
It is often a good idea to open several different types of savings accounts so that you cover all bases in terms of your short-term and long-term financial needs.
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A regular saving account won’t often offer the best interest rate. That is because you can get access to your money as and when you want. This type of savings account is good for putting emergency money away. That means you have some spare cash to pay for an unexpected bill rather than use a credit card.
All the time you are saving regularly and not using the money, it will earn you some interest.
Choose a high-yield savings account when you want a better rate
If you are putting money away to try and grow your pot, you need to find an account with a better rate of interest. A high-yield savings account should offer that.
This type of savings account offers competitive rates with minimal fees. Shop around to find the best deals rather than simply choosing the one your bank offers.
Money market accounts combine regular banking with saving
This type of savings account is designed to offer you a combination of the regular features associated with a checking account together with a savings element.
If you often have spare money each month and can hold a higher balance, this type of account could be an option to consider.
CD accounts are worth considering if you don’t need your cash in a hurry
The interest rate you are offered on a savings account usually varies according to how long you are prepared to leave your money on deposit without accessing it.
A CD account is a viable option if you are happy to lock cash away for a period of time in return for a better rate of interest. Be aware that withdrawal penalties can be steep if you do need to access your cash early, so be prepared to commit to the term.
Saving for a specific goal
If you are putting money away for a specific reason, such as saving for a dream holiday or providing money for your kids when they become adults, a specialty savings account is worth considering.
This type of savings account is designed for people who don’t plan to spend the money they are saving and have a long-term goal in mind.
A place to park your cash temporarily
A lesser-known savings account option is a cash management account. The purpose of this style of savings account is to offer a place where you can hold cash that you are then going to use for another specific purpose, such as investing in a retirement account.
They offer a convenient way of earning extra interest on cash that you plan to invest at a point in the near future.
All of these types of savings accounts have pros and cons attached to them. Decide what you want to do with your cash and how long you intend to save for. These factors will help you decide which type of savings account to choose.