For many people, saving money means different things. For some, it means putting their money in a savings account. For others, it could mean a money market account or an interest-bearing checking account. The savings rate you’ll get depends on where you choose to sock away your money.
Ways to save
When it comes to savings accounts, there are two common types: the passbook savings account and the high-yield savings account. Passbook savings accounts usually have little or no fees and no minimum balance. As a result, the savings rate you’ll get is low. A high-yield savings account will give you a better return, but they have more requirements. Both are backed by the FDIC, which means your money is safe up to $250,000.
A money market account is a savings account offered by banks and credit unions. With a money market account, you typically get higher savings rates than a traditional savings account — but you’re required to have a higher minimum balance. Many of the best money market account rates are reserved for account holders with balances of $10,000 or more.
Checking accounts are another way to save and get a return on your money. With an interest-bearing checking account, you can write checks and access money via a debit card while earning interest at a nominal savings rate. The downside of an interest-bearing checking account is that the banks charge higher fees than free checking accounts. The fees are often waived if you meet certain conditions, such as keeping a minimum balance or making five or fewer debit-card transactions per month. Fees can also be waived if you set up direct deposit with the account.
High-interest checking accounts give above-average savings rates, but a lot of the accounts have high fees and requirements that could negate any benefits.
How much to save
There are many reasons to save, and having a plan can put you that much closer to reaching your goal. Bankrate’s savings calculator can help. The tool calculates how much you must put away monthly and even daily.