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Consider All Your Savings Options
Selecting a savings account depends on two things: how you plan to use your money, and when you’re going to need it. As you explore various savings options, see which accounts best meet your financial goals.
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Common banking terms
Before shopping for a savings account, you should know some basic banking terminology. Like the difference between interest and compound interest. And what exactly makes up an Annual Percentage Rate (APR).
Know what you’re talking about—take a look at these common banking terms.
Savings accounts
Be sure to compare account features, such as the interest rate, when you would start earning interest, the annual percentage yield, and any related fees. Note: This list is just a sample of savings options.* For a more comprehensive selection and specific rate information, please contact your financial institution.
- Certificate of Deposit (CD): If you want to build your savings and won't need the money soon, think about getting a certificate of deposit. They offer a guaranteed rate of interest for a specified term. Financial institutions generally require that you keep your money in the account until the term ends, and they might pay a higher rate of interest than a savings or other account. Typically, the longer the term, the higher the interest.
- Savings Account: Want easy access to your funds? Open a savings account. They earn interest and allow you to make withdrawals, although the allowed monthly interest may be limited. Note: Financial institutions might attach various fees to savings accounts. Ask about any special accounts available for college students.
- Money Market Deposit Account (MMDA): If you typically write only two or three checks per month, a Money Market Deposit Account (MMDA) might be your best option. An MMDA is an interest-bearing account that allows you to write checks. It usually pays a higher rate of interest than a checking or savings account. MMDAs often require a higher minimum balance and limit you to only three checks per month. Note: Most financial institutions impose fees on MMDAs.
*List excerpted from Making Sense of Savings, prepared by the Board of Governors of the Federal Reserve System.
