Very
liquid: With
a savings account, you
can usually get your
money as soon as you
need it. If you have
an online account, you
might have to wait up
to a couple of days.
Pays
interest: Savings
accounts typically reap
some of the lowest interest
levels among savings
vehicles. But some institutions
and online divisions
of national banks are
paying rates that rival
CDs.
Easy
to open: Institutions
are making opening accounts
easier than ever. Many
accounts take very little
money to open and some
have a low (or no) minium
balance requirements.
Convenient:
You can open a savings
account at virtually
any institution. Many
banks and credit unions
also let you bank online
or by phone.
The
beauty of automation:
Many institutions will
let you set up automatic
deposits to your savings
account to make saving
that much easier.
Funds
insured: At an
insured institution,
your money is federally
insured up to $100,000.
Low
payoff: Usually
not the highest interest
rate available. While
accounts pay some interest,
you can typically earn
more through other types
of savings vehicles.
But institutions are
getting very competitive,
so if interest is important,
shop a little.
Easy
access: These
can be tempting for
someone with no savings
willpower. Because you
can lay your hands on
the money at any time,
you could be tempted
to drain the account
for "wants," rather
than "needs."
Restrictions:
These could carry penalties
or minimum balance requirements.
Some savings accounts
can carry penalties
for not maintaining
a certain minimum balance
(anything from dropping
the interest rate to
assessing a fee.)
Unwanted
tie-ins: Passbook
savings accounts can
sometimes be tied to
checking accounts. Some
institutions will tie
your savings account
to your checking account
as a form of overdraft
protection. But tell
them that's not a service
you want -- one impulse-shopping
spree could wipe out
all your good intentions.
The ideal customer for the traditional savings account is someone who wants to save but realizes he could need that money instantly at any time.
Think
young, cash-strapped and
no safety net. As you save
that recommended three-to-six-months'
living expenses, you can
also access it any time
you have to pay medical
bills, make emergency car
repairs or replace the refrigerator.
It's
also a good vehicle for
older, more experienced
consumers with special needs.
Like the guy who just saved
a bundle raising his insurance
deductibles to $1,000. Now
he parks $1,000 in an account
he can raid at a moment's
notice and he's covered.
Savings
accounts can also act as
a temporary parking spot
for money you're accumulating
to invest while you make
more long-term strategy
decisions. But, even in
the best-case scenario,
it's not the ideal place
to leave large sums of money
long term, because rates
will usually just about
cover inflation.
Trying
to figure out which options
best match your savings
strategy? Here are several
key points to compare and
contrast at a glance.
