Looking at savings options
"I actually have the money taken out of my paycheck before I see it— because if I know I have it, I’m going to spend it."
If you’ve already started saving, you probably know a few options beyond tossing your change in a jar. Your options include savings accounts, money market accounts, U.S. savings bonds, and certificates of deposit.
- Savings accounts: Offered by banks and credit unions, these offer low minimum balances, and are considered among the safest places to put money. They also earn a guaranteed rate of interest, can be government insured, and usually make it easy to withdraw money.
- Money market accounts: Offered by many banks and credit unions, these work like checking accounts and pay higher interest than savings accounts. You can take money out any time, usually with no penalty, but they may require a high minimum monthly balance—$1,000 to $10,000-to avoid fees. Additionally, you may only be able to write a limited number of checks.
- U.S. savings bonds: With U.S. savings bonds you loan your money to the government and the government agrees to pay you a specific interest rate over a set time period. While savings bonds typically pay higher rates than savings accounts, if they're cashed in within five years of purchase, they are subject to a penalty of about three months' interest.
- Certificates of deposit (CDs): When you purchase a CD you loan your money to a bank or credit union for three months, six months, one year, two years, or longer. The bank pays a set interest rate on your money over that time and returns the full amount when the time is up. The rate can be higher than savings accounts. The longer the time, the higher the rate. If you take money out before maturity (the amount of time you agreed to leave the money in the bank), you may have to pay a penalty.
If you want to learn more, talk with a bank representative, or look at the information provided on your bank’s Web site. Additionally, you can find information on a variety of savings options at http://www.bankrate.com/.