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By Jean Folger Updated Feb 27, Money that is considered savings is often put into an interest-earning account where the risk of losing your deposit is very low. Online banking has expanded the variety and accessibility of savings accounts. Here are some of the different types of accounts so you can make the most of your savings. Money in a savings account typically cannot be withdrawn through check-writing and occasionally, not at an ATM.
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Interest rates for savings accounts are characteristically low; however, online banking does provide slightly higher-yielding savings accounts.
High-Yield Savings Accounts High-yield savings accounts are a type of savings account, complete with FDIC protection, which earn a higher interest make money account than a standard savings account. The reason that it earns more money is that it usually requires a larger initial deposit, and access to the account is limited. Online high-yield bank accounts are available, but you will need to set up transfers from another bank to deposit or withdraw funds from the online bank.
It's worth learning how to find and open these accounts. And make sure to shop around for the best high-yield savings account rates to ensure you're maximizing your savings. Like savings accounts, CDs are FDIC-insured, but they generally offer a higher interest rate, especially with larger and longer deposits.
A CD ladder allows you to stagger your investments and take advantage of higher interest rates. As with savings accounts, shop around for the best rates on CDs. Money Market Funds A money market mutual fund is a type of mutual fund that invests only in low-risk securities.
As a result, money market funds are considered one of the lowest risk types of funds. Money market funds typically provide a return similar to short-term interest rates.
Interest rates are not guaranteed, so a bit of research can help find a money market fund that has a history of good performance. Money Market Deposit Accounts Money market deposit accounts make money account offered by banks and typically require a minimum initial deposit and balance, with a limited number of monthly transactions.
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Unlike money market funds, money market deposit accounts are FDIC-insured. The accounts typically offer lower interest rates than certificates of deposit, but the cash is more accessible.
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Treasuries are exempt from state and local taxes and are available in different maturity lengths. The difference between the purchase price and the face value is the interest.
Treasury notes, on the other hand, are issued with maturities of 2, 3, 5, 7, and 10 years, and earn a fixed rate of interest every six months. In addition to interest, if purchased at a discount, T-notes can be cashed in for the face value at maturity.
When you purchase a bond, you are lending money to one of these entities known as the issuer.
Bonds are issued for a specific period at a fixed interest rate. Each of these bond types involves varying degrees of risk, as well as returns and maturity periods.
Also, penalties may be assessed for early withdrawal, commissions may be required, and depending on the type of bond, may carry additional risk, as with corporate bonds where a company could go bankrupt.
The Bottom Line Savings allow you to squirrel away money while earning modest, low-risk returns.
Due to the large variety of savings vehicles, a little research can go a long way in determining which will work hardest for you. And, since interest rates are constantly changing, it is important to do your homework before committing your money to a particular savings account so you can make the most of your savings.
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