You only consider money as savings only when you put it in a place where it yields interest with low risk of losing your initial deposit. However, you may want to receive higher interest by putting your money in higher-risk investments like stocks but the idea behind savings is to get a larger interest slowly with small or no associated risk. One way to keep your savings is with the use of online banking which has increased the accessibility of savings accounts. Below are different types of accounts you can keep your savings:
Savings Accounts – These type of accounts is offered by banks. Not only banks, credit unions (a cooperative institution, which is owned, created and maintained by its members; members can be members of a work or trade association or employees of a company) are also offering this account. The money deposited in such accounts is monitored and insured by FDIC (Federal Deposit Insurance Corporation) up to certain limits. There are rules and regulations guiding this savings account like charging a member a fee if he has reached his monthly transactions. Such savings cannot be withdrawn through check or at an ATM. It has lower interest rates except if it is done online.
High-Yield Bank Accounts – This is a type of savings account, which yields a higher interest more than a standard savings account. These type of accounts are completed with FDIC protection. The higher interest comes from the fact that you need a larger initial deposit to open the account and you have limited access to the account. Your bank will contact you once you have other accounts with them. You can open high-yield bank accounts anytime but you have to create a form of transfer from another bank to withdraw or deposit your savings to the online bank.
Money Market Funds – This is a type of mutual fund, which invests only in low-risk securities. Thus, money market funds are one of the lowest risk savings available. This provides short-term interest rates and it is not insured by FDIC. However, it is regulated and controlled by the Securities and Exchange Commission’s (SEC) Establishment Act of 1940. However, National Credit Union Agency insured money market funds at a cooperative society or a credit union. Many banks, brokerage firms and mutual funds offer money market funds. Lastly, their interest rates are not that high and vary.
Bonds – Similar to an IOU, bonds are low-risk debt investments, which is issued by municipalities, states, governments and companies to fund projects. You lend money to one of these entities (issuer) when you purchase a bond. The bond issuer pays a certain amount of interest in exchange for the purchase or loan and the initial value of the bond will be returned at maturity. There are different risks associated with bonds like returns and maturity periods.
Savings is good and it allows you to accumulate money while earning modest with low-risk returns. There are several forms of savings available nowadays and, with a little research, you will be able to choose the perfect one for you. Others include Certificates of Deposit (CDs), Treasury Bills and Notes and Money Market Deposit Accounts.
