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What’s the Best Way to Save Money?

Nov 13, 2020
By Mariclare Cranston, Content Specialist

How to Feel Like You’re Making Smart Money Moves

Want to feel like you’re making smart money moves? Picking a savings tool that matches your savings goal will definitely help. We tend to limit our thinking to the basic Savings Account. And while there’s nothing wrong with a Savings Account, there are options that may be better for you.

Here are four different savings tools to help you reach your goals.

I Just Want to Have an Emergency Fund

If your main goal is building up an emergency account, you should consider a savings product that does two things:

  • Protects your money, and

  • Keeps it accessible.

The whole point of an emergency fund is to separate it from the money you will be spending. At the same time, you need to be able to access the money quickly and easily if you do have an emergency. In this case, a basic Savings Account may be your best solution.

With a Savings Account, you can make regular deposits and establish automatic transfers to build your balance. You won’t be tempted to spend the money since it’s not in your Checking Account. Yet you can withdraw funds if you do find yourself in a financial bind.

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I Have a Short-Term Savings Goal

Not all goals are years in the future. Maybe you need to pony up for a bridesmaid’s dress or tux. Maybe you want to take a much-needed getaway. The smart financial decision is saving up for these expenses, rather than swiping your card. Who wants to pay for a bridesmaid’s dress for the next year?

When you have short-term goals, you want to keep the cash accessible but removed from your spending money and your emergency savings. Your best bet is to open a Special Savings Account.

Just like your basic Savings Account, this Special Savings Account allows for regular deposits and automatic transfers to build the balance. And there are no penalties for withdrawing money, unless your financial institution requires a minimum balance.

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I Have a Long-Term Savings Goal

Long-term savings goals include expenses like a down payment for a car or house, college savings, even retirement planning. When planning for the long game, you should take advantage of that timeframe to earn some money on your savings.

Savings products earn interest. Even your basic Savings Account does. With basic accounts, though, the amount you earn tends to be quite low (think less than 1%). So if you know you have a chunk of time to save, a product that has a higher yield tied to a term length can benefit you.

Consider Certificates of Deposit. Certificates earn higher interest because you’re not allowed to access the funds for a certain period of time, also known as the term. Because your financial institution keeps the funds on deposit for a longer period of time, you’re rewarded with a higher yield. There are various term lengths, including terms as short as a month up to 5 years or more.

Unlike Savings Accounts, you cannot usually make regular deposits into a Certificate nor can you withdraw the money early without incurring a penalty. For this reason, it’s important to pick a term that aligns with when you think you’ll need the money. For example, if you plan on buying a house in 3 years, you wouldn’t commit to a Certificate with a 5-year term.

Because you can’t access the money you’ve put into a Certificate of Deposit prior to the term date, they aren’t ideal for an emergency Savings Account.

You’re ready to start savings, but not sure where to start.

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I Want My Savings to Earn Money

You may be somewhere between a basic Savings Account and a Certificate of Deposit. Isn’t there a way to make money on your savings but still be able to access your money?

Yes! Money Markets are a great alternative. Interest earned on your Money Market balance is usually higher than a basic Savings Account, yet you can access the funds as you need them.

Money Markets also allow regular deposits so you can continuously build your balance. You can often write a certain number of checks against your Money Market, too, which can be handy if you have emergency repairs pop up.

Money Markets often have balance requirements, though, so if your account drops below that required amount you will incur a fee. If you’re considering a Money Market, you may want to maintain a basic Savings Account as well.

Savings tools chart

Picking a savings tool that matches your goal will help you feel financially confident. You’ll know you’re making smart money moves. It’s a big decision, though, and you can also talk to us about which may be the best option for you.

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