Better Ways to Save Money

Better Ways to Save Money

Have you been stuffing money in your piggy bank or hiding it under your mattress? Before you squirrel away another cent, you need to know there’s a better, smarter and more secure way to save (and grow) your money.

Published Tuesday, July 29, 2014

Have you been stuffing money in your piggy bank or hiding it under your mattress? Before you squirrel away another cent, you need to know there’s a better, smarter and more secure way to save (and grow) your money.

With several types of accounts from which to choose, you simply need to compare each of them and understand which ones are best suited to help you meet your financial goals. Here are the different types of accounts that are available at most banks and credit unions, as well as a brief description of each.

Checking Account—This type of account keeps your money secure while giving you easy access for regular transactions. You can write checks or use your debit card to pay your monthly bills or to make purchases. The money you spend is automatically deducted from your account. Some financial institutions have monthly service fees and other charges for such things as overdrafts to your account and using ATMs outside of their network.

Savings Account—This account is an easy way to start working toward your savings goals. Your money earns interest and there is no penalty for withdrawals as long as you don’t go below the minimum balance requirements, if there are any. Like checking accounts, be aware of monthly service fees and other charges.

Certificate of Deposit (CD)—Money deposited in a CD is tied up for a certain length of time. It can range from a couple of months to several years so be sure you won’t need immediate access to those funds. The benefit to a CD is the higher rate of interest that is paid on your money compared to a traditional savings account.

Money Market Account—This is similar to a savings account but usually higher balances are required to avoid monthly fees. Interest rates are higher too, so the money you deposit earns greater dividends.

Individual Retirement Account (IRA)—Traditional IRAs and Roth IRAs are ideal for helping you save for your retirement. Both have contribution limits, but the money you deposit into a traditional IRA is tax-deductible while funds put in a Roth IRA are not. However, money that’s in a Roth IRA can be withdrawn without tax penalties in many situations.

Health Savings Account (HSA)—This type of account is available to those who have a high deductible health insurance plan. Contributions are limited but they are also tax-deferred. The purpose of an HSA is to cover all or most of a plan’s deductible and other medical expenses not covered by insurance. Funds in the account earn interest and are yours to keep year after year.

For more detailed information based on your specific needs, you can always speak to a representative at your financial institution. Additional information is also available on the following websites:

http://www.nerdwallet.com/blog/rates/choose-checking-account-savings-account-cd-money-market-account/

http://guides.wsj.com/personal-finance/banking/what-is-a-certificate-of-deposit-cd/

http://www.getrichslowly.org/blog/2009/07/07/an-introduction-to-money-market-accounts/

http://www.irs.gov/Retirement-Plans/Individual-Retirement-Arrangements-(IRAs)-1

http://www.hsacenter.com/index.html

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