Starting to Save: Choosing the Right Savings Account Option for You
Saving money is a crucial aspect of managing personal finances and planning for the future. However, if you’re just getting started with saving, it can be confusing to figure out which option is the best fit for you. In this article, we will cover three main savings account options (traditional savings, money markets, and share certificates) and who might benefit the most from each.
Traditional Savings
The traditional savings account is the simplest and most common type of savings. If you opened an account as a child with a parent or grandparent, this was probably the starter account they chose for you. A traditional savings account has the lowest barrier to entry, as there’s usually a very nominal minimum balance requirement. Your funds are also easily accessible and do not have to be kept in the account for a set amount of time. With a traditional savings account, you can earn dividends, make deposits and withdrawals without penalties, and access your money through ATMs, online banking, and other convenient methods.
Who It's a Fit For
A traditional savings account (called a Base Share Savings Account at Andrews Federal) is an ideal option for people who are just getting started with saving. It’s easy to access and has no penalties for withdrawals, making it an ideal option if you’re using your savings to build up an emergency fund.
Money Market
A money market account provides a higher dividend/interest rate than a traditional savings account, making it an attractive option for those looking to grow their savings faster.
Depending on the financial institution you choose, there may be some specific criteria related to a money market account - you may be required to maintain a specific balance or limit your monthly transactions (at Andrews Federal, you’re not required to jump through any additional hoops!). Money market accounts do not have set terms, meaning that you are not required to keep your funds in the account for a specific period of time.
Who It’s a Fit For
A money market account is an excellent option if you’re planning/saving for a short-term goal. For example, you might choose a money market account if you’re saving up for a vacation or to make a down payment on a car. Every extra dollar helps, and the higher dividend rate on a money market account means your funds will grow faster than in a traditional savings account.
Share Certificate
A share certificate pays a fixed dividend/interest rate for a specific term, usually starting at six months and extending up to seven years.
Your financial institution pays you a higher rate because you agree to keep your funds in your account throughout the term of the share certificate. If you need to access your funds during the share certificate’s term, you may pay a penalty or lose some of the dividends you accrued.
Generally, opening a Share Certificate requires a higher starting deposit than a traditional savings account, and the dividend rates can be significantly higher than other savings options.
Some institutions may also offer special programs to encourage Share Certificate accounts during a time period when dividend and interest rates are fluctuating. For example, with the Raise Your Rate Share Certificate offered by Andrews Federal Credit Union, you can earn a higher interest rate. And, if rates go up, you can request a rate bump - up to three times during the Certificate's term.
Who It's a Fit For
A share certificate is ideal for savers who know they don’t need immediate access to their funds or who are saving with a long-term goal in mind. Examples might include saving for a wedding or for a down payment on a home.
When trying to find the best credit union savings account option for you, consider your personal financial goals and habits. If you need easy access to your savings, a traditional savings account may be the right choice for you. On the other hand, if you have a specific savings goal and are willing to tie up your money for a set period, a Share Certificate may be the best option.
Andrews Federal Credit Union offers a variety of savings account options to meet the needs of its members. Whether you're looking to grow your savings quickly or just want an easy place to keep your funds safe and secure, we offer accounts and solutions to help you reach those goals. Take control of your finances and build a stronger financial future today by opening a savings account with Andrews Federal Credit Union.