Which Savings Account is right for you?
Monday, 9 August 2021
When it comes down to it, there are only a handful of things you can do with your money: Spend, invest, donate, or save.
Saving is a bedrock of any financial plan, whether you're shoring up an emergency fund or have a specific goal in mind. When you decide to open a savings account, you generally have three categories: savings accounts, Money Market accounts, and CDs (certificates of deposit).
Should I open a Savings account
Savings accounts are generally the most flexible. Depending on your bank and the account you choose, you may need to pay a nominal periodic fee, which is often waived if you maintain a minimum balance or link it to other accounts. Some accounts will also earn a small amount of interest.
Basic savings accounts are great for:
- Teaching a child about saving money.
- Establishing an emergency fund that you can access at any time.
- Stashing away money for a specific expense — especially if it's something that has an uncertain timeline, like a down payment for a house, or buying a car as soon as your old one gives up the ghost.
- Adding a layer of protection against overdrafts.
One effortless way to build your savings is to set up automatic deposits and transfers to your account. Setting up automatic deposits helps lessen the temptation to spend money on things you don't really need.
Should I think about opening a Money Market Account
When you're ready to ratchet up your savings, you may want to consider a Money Market account. You may earn a higher rate of interest while still having access to your money. Like a regular savings account, Money Markets require a minimum balance (as little as $25) and sometimes have a fee, which is often waived when you set up automatic transfers or maintain a significant balance.
A Money Market account is good for:
- Saving a good sum of money—$10,000 or more—you've not yet earmarked.
- Putting away money for a long-term goal that may require periodic withdrawals (such as a wedding, a house, or starting a business.) Typically Money Market accounts have check-writing privileges.
Or, should I invest in a CD
If you're certain you're not going to need immediate access to your savings, a CD may be the perfect place to park funds. With a CD, you may earn more interest — at a fixed rate — than a regular savings or Money Market account, but you won't have access to your money for the term of the CD.
But there are several terms to choose from — ranging from six months to three years — so you can select one that best suits your needs. CDs also may require a higher minimum (around $500), and if you need those funds before the term is up, you may be penalized.
CDs are perfect for:
- Saving for a specific expense down the road (such as home renovations, tuition, or a vacation).
- Starting a nest egg for a loved one — a child or a grandchild, for instance — that will grow.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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