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The Secrets to Saving More Money

Today, there are many options for where to put your money.

From using regular checking and savings accounts to deciding whether to open a money market account or a CD (certificate of deposit) to even opening an account for holiday savings — each offers something to help you save a little more.

Money market accounts and savings accounts

In an article in the Houston Chronicle, finance contributor Leigh Anthony compares these two types of accounts. Both offer interest on all deposits made and are insured by the federal government, making them safe, low-risk investment options.

Both account types also have a federal limit of six transfers per month out of the account. However, money markets act more like checking accounts, giving you the ability to write checks, make electronic transfers, and withdraw money with an ATM or debit card. With savings accounts, you can transfer money, but you may or may not be able to withdraw funds directly without talking to a bank teller, depending on the institution.

“Interest rates on savings account[s] are typically very minimal as there is not a minimum balance required,” reports Anthony. “[W]ith a money market account, the interest rate is higher and may fluctuate based on a schedule posted by the [financial institution].”

A savings account would therefore be more appropriate for putting away cash that you want to save for emergencies or a future large purchase, whereas a money market account would be better for savings that you need to access more often, such as for major home renovations.

CD accounts

Anthony also discusses the difference between a CD and a money market account. Unlike money markets, a CD account has a set interest rate that doesn’t change through the investment term. You can set this term from anywhere between 30 days and five years — and then sit back as your money grows.

Furthermore, according to an article in the Wall Street Journal, CDs are reported as low-risk savings accounts with an interest rate that could be higher than a money market account. The money is (probably) federally insured, “and you’re guaranteed to get back what you put in, plus interest once the CD matures” through its predetermined term. But make sure not to withdraw funds before the maturity term ends, or you’ll face a hefty penalty.

Holiday savings accounts

While some institutions offer actual “holiday savings accounts,” this term is broad enough to encompass savings specific for holiday spending. Many people spend a lot of their money during the holidays for gifts and family meals, and a great way to make sure you have funds set aside for these purchases is to open an account just for holiday savings.

“The key is to think about holiday spending the same way you would other recurring, nonmonthly expenses, like annual insurance premiums, quarterly tax estimates and home maintenance. Set up an account, and automate deposits from your paycheck like any other bill,” says CFP® Tom Gilmour of LearnVest Planning Services in a November 2014 article in Forbes.

If you need more guidance on what type of savings account to open, contact us and we’ll be happy to help.