Bibles, mattresses, bras, socks, jewelry boxes, and those tall coca cola bottle coin holders. My perception of what savings accounts were came in many forms based on how I saw family members save their money. When my aunts used to say, “grandma is going to the curtain,” that literally meant she was going to her bedroom curtain aka “the Bank of Dotty” to withdraw money. As a child, my savings account was an elementary pencil and crayon box that I hid in my top drawer behind my ruffled and scrunchy colorful socks (I was a fashionista before I even knew the term). I’ve grown up now, and although these methods still work under the basic principle of saving money, let’s talk about other options of saving money that not only will safe keep your money, but let your money work for you.
“Out of the crayon box, into the savings account”
A savings account is a safe and secure way to manage your savings. Savings accounts can be a very important part of your short and long term financial goals. My husband and I most recently relied on our savings account to get us through my extended maternity leave (Check out my blog "Oh Baby!"). Long term we’d like to build enough savings for a few years’ worth of expenses and break the chain of living paycheck to paycheck. The Federal Deposit Insurance Corporation (FDIC) protects funds placed in banks and other financial institutions, up to $250,000 per account. Additionally, most banks pay some form of interest on your savings, as they actually lend your money out to others (I swear I used to think everyone’s money was stacked in little piles behind those huge safe doors at each bank…lol). As you continue to deposit money for savings purposes, the amount of interest you make will increase as well (stay tuned for my blog on best banks to open savings accounts).
"Flip your money three ways"
There are typically three types of savings accounts:
Traditional savings account - This is a simple savings account where you can deposit and withdraw money at a brick and mortar bank. These accounts earn very little interest, typically .5-1 percent per year.
Money market account - Money market accounts are typically meant for larger balances that you need to access less often than money in a traditional savings account. On average these accounts offer higher interest than savings accounts–but a tradeoff may be a minimum balance requirement to open the account or a limitation on the number of transactions you can make for free in a certain period.
Online, high yield savings account: Online banks usually offer better rates than other types of savings accounts because they have less overhead than traditional brick and mortar banks. Your money isn’t immediately available for withdrawal, however, most banks take only two or three days to transfer the money into your checking account. I am a fan of these accounts.
There are many financial tools to help you work towards achieving your future goals. Savings accounts are a convenient, as well as safe option to begin building your little money pile behind the huge safe door :)