What type of bank account should I consider, to save money?
Financial guru Dave Ramsey has said that the most successful savers are those people who get into the saving habit. If you’re already inclined to sock away a few dollars here and there, you have half the battle won already.
That said, there are some bank accounts that are actually better for saving money than others, although the criteria isn’t as objective as it might seem. If you want to know the best type of bank account to open to help you save more money, here are some things you need to know.
What do you want from the account?
Before you go looking for a new account, you’ll want to figure out what your savings goals are. Do you want an account with a high interest rate above all else? Or would you rather get a bank account that gives you easy access to your cash? Or is it important to you to save money above all else? Consider your answers to these questions before you open an account. That will help you get the right account for your biggest savings goals.
What Types of Accounts Are There?
Not every bank account is created equal, even among the same types of accounts. For example, if you’ve decided that you want to save money above all else, you can get an account that automatically saves you money. Each time you use your card with this type of account, the final purchase amount will be rounded up to the nearest dollar. The “extra” from this purchase goes into your savings account automatically. Think about perks like these for each type of account you consider.
Here are the different accounts that allow you to save money.
When you were a kid, chances are your first account was a savings account. This type of account allows you to access your cash through a cash machine or, of course, at your bank. If you opt for this type of savings account, you’ll want to go with one that has the best interest rate.
You should know additionally that the savings account with the highest interest rates might actually be an online one, so shop around. That said, you can certainly find a savings account at your local bank. These types of accounts usually allow easy access to funds when you need them.
A checking account is another one that your regular brick-and-mortar bank offers. This account allows you to access your cash in a number of ways. You can write checks or use the ATM. These two options will probably be the ones you use most frequently.
Some banks, in an effort to secure your business, will offer high-interest checking accounts, low minimum balance requirements, and other amenities. If you want to save more money, be sure to look at each amenity carefully, or you could see your money being eaten up by hidden fees. As with the savings account option, online options exist, too.
And like the savings account option, you usually can withdraw your money from a checking account rather quickly. If liquidity is important to you, then this might be the way to go.
Other Types of Accounts
When you’re interested in more long-term savings, you have some additional options, though not all banks offer these options. You may have to shop around. These types of accounts are money market accounts and certificates of deposits (CDs).
Both of these types of accounts typically offer higher interest rates than other types of bank accounts. The CD has an additional distinction of being an account that encourages long-term savings: It’s typically difficult to withdraw money from the account before the payoff date, without accruing a penalty. You also have to start with a pretty high savings balance. In many cases, you’re looking at least a thousand dollars to start.
Money market accounts also have that restriction, meaning you may be looking at depositing a grand to begin with. In many respects, these offer you some of the same benefits as a checking account. You can withdraw money or write checks against them.
However, these accounts usually come with withdrawal rules, which dictate that account holders can only access their money a limited number of times each month. In this respect, this type of account encourages saving because you really have to think about each purchase before you make it.
Which type of account do you think would work best for your savings goals?
A BMG loan works through your employer, and is an affordable lending option for life’s events – but we still encourage our clients to use responsible long-term financial planning.