Trying to understand banking and all the different accounts available can be SO overwhelming. “What is a high yield savings account– when did that become a thing?” or “How on earth do I start saving for retirement?”. Lucky for you, today we are breaking down a few of the basic accounts you need to know about so you can get started and know what you’re talking about at the bank.
1. Checking Accounts: Convenient and Accessible
A checking account is your go-to account for everyday money matters. Checking accounts are awesome because you can easily withdraw your money for daily transactions; this is usually done via debit card. Although checking accounts don't earn much interest, they provide the flexibility you need for your daily financial activities.
2. Savings Accounts: Building a Strong Financial Foundation
Savings accounts are… just that! Accounts that you can safely store your money in for a rainy day, a vacation, a dream house– anything you’d please. These accounts usually have a higher interest rate than a checking account, and are less likely to be used for your daily transactions.
3. High Yield Savings Accounts: Accelerating Your Savings
Looking to supercharge your savings? Consider a high yield savings account. Similar to savings accounts, but better! These accounts allow you to save your money but accrue interest at a higher rate (APY). This means more money in your pocket!
4. Certificates of Deposit (CDs): Securing Long-Term Returns
These accounts are great for people who know they don’t need to use a certain amount of money for a fixed period of time. CDs offer higher APYs than checking or HYS accounts that are locked in. A CD equals a steady rate of growth for a fixed period of time. However, early withdrawal before the maturity date may incur penalties. CDs are particularly suitable for long-term savers who don't require immediate access to their funds and want the security of predictable returns.
5. Money Market Accounts: Balancing Yield and Accessibility
Money Market Accounts (MMAs) offer a balance between yield and accessibility. They provide competitive interest rates and typically require a higher minimum balance than regular savings accounts. MMAs often come with limited check-writing capabilities and a debit card for easy access to your funds. If you seek higher yields while still having the flexibility to withdraw funds when needed, a money market account can be a favorable choice.
6. Retirement Accounts: Securing Your Future
Planning for retirement is crucial, and retirement accounts can help you build a secure future. These types of accounts include employer-sponsored plans like 401(k)s and individual retirement accounts (IRAs). Retirement accounts offer tax advantages, allowing you to save specifically for your retirement years. Contributions to these accounts are often tax-deductible, reducing your overall tax liability. Understanding the different retirement account options and their benefits can pave the way for a comfortable retirement.
