savings

How do I: Choose a savings vehicle?

By Rose Raymond • Bankrate.com

Topic: Checking & Savings

Who is affected: Consumers at any life stage

DEGREE OF DIFFICULTY: Easy

What you'll need: Bank statements

What you need to know

People looking for a safe place to stash their money have many options from which to choose. How can they know which type of savings account is right for them?

The first step is to learn about savings vehicles so you can make educated decisions. Consider the level of access you'll need to your stashed cash -- this is called liquidity. Do you need the ability to tap the money at a moment's notice, or can you wait for a period amount of time?

Also, consider how much money a savings vehicle will earn. Safer vehicles often earn less, while riskier ventures usually yield higher profits. Finally, will your money be insured?

Here's a quick breakdown of popular savings vehicles.

Key characteristics of popular savings vehicles

Type	Liquidity	Yield	Safety
Statement savings account	High	Lower	Insured
Money market account	Partial	Higher	Insured
Money market mutual funds	Partial	Higher	Uninsured
CDs	With penalty	Higher	Insured
529 accounts	Highly restricted	Higher	Uninsured
Savings bonds	Restricted	Moderate	Insured
Treasuries	Restricted	Moderate	Insured

Step-by-step

Choosing the right type of savings account is the first step on the pathway to financial security. How long will it take you to become a millionaire? Use this calculator to find out:

Initial amount:

Monthly deposit:

Average annual return:

Average annual inflation:

Retirees often are best off choosing a vehicle that offers minimal risk, as they usually need the money sooner.

Younger investors may flirt with riskier vehicles -- especially if they're working with money that they won't be using for a long time.

529 accounts are a good idea for almost anyone with kids. They're like an IRA for your child's college tuition.

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Posted: Jan. 1, 2010

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Savings Overnight Averages

Product	Yield	+/-	Last week
MMA	0.49%		0.49%
$10K MMA	0.48%		0.50%
MMA jumbo	0.62%		0.62%
Interest checking	0.51%		0.51%

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ByDr. Don Taylor, Ph.D., CFA, CFP, CASL

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