There was once a time when people would keep their cash hidden in jars, under their mattresses, or even in sock drawers. As financial institutions grew, and FDIC/NCUA insurances were put in place to safeguard people from losing their money after structural financial problems, such as the Great Crash in the fall of 1929, people began to trust financial institutions again.
People have undoubtedly shifted their perceptions and attitude toward financial institutions, and now, with the plethora of services and products offered, one can manage their money so it works to their advantage. That is, there are varying types of accounts that will be able to help you save for the long- and medium-term and be available to access for day-to-day use.
There are three main account types that come up when we talk about traditional accounts: checking, savings, and money market accounts. Checking accounts allow individuals to easily access their money and use the account for purchases, either by taking money out from an ATM or using cashless spending, like with the use of a debit card. A savings account is used for what it sounds like: mostly savings. These accounts can even be specified for things like college or retirement savings. Lastly, there’s the money market account, which allows people to keep larger sums of money in their accounts (and they normally offer a good interest rate), yet they can still access the funds electronically, usually up to a certain number of times per month or cycle.
Learning about the differences between account types can help you understand where you should be putting your money—and how you decide which type of account to open—has a lot to do with what your plans are for that money.
Checking accounts are often the go-to, daily-use account that allows you multiple withdrawals and enables both online and over-the-phone purchases. Checking accounts are tied into a bigger system known as the ACH, which allows electronic transfers and deposits. Think of your checking account as an electronic wallet. It’s the money you are spending to cover rent or mortgage payments, utilities, groceries, dining out, transportation, and the other things for which one would need to spend money regularly. In terms of what you’ll earn in interest, if anything, it will normally be pretty minimal. They are federally insured by the NCUA/FDIC.
Specialized Checking Accounts
There are some credit unions that offer checking accounts for the individual who needs something a little different than the average checking account. Sometimes you want to earn a little bit more from the funds you have in your checking account, and that’s where a high-APY checking account may be a good option. The interest rate can vary, but you may be able to find offers of 2.00% APY or more.
Rivermark Community Credit Union offers various types of checking accounts, money market accounts, and savings accounts to members so that their money can grow well and be used as needed.
Savings Accounts: Traditionally, One of the Best Ways to Save
Although the savings account isn’t earning at the rate it once did, it is still taking your savings and helping it grow. Like the other account types, it’s NCUA/FDIC insured. Offering a great way to grow your savings, there are sometimes specialized savings accounts, such as those for college, retirement, or even travel. They offer ATM access in addition to withdrawals at the credit union. They don’t have any check-writing potential or tie a debit card to the account, but that’s a good thing when you’re trying to save money. Of course, you’re able to make draws on the account, but there are a maximum number of times you can do so each month.
As a basic rule, you should aim to have several months’ worth of expenses saved in your savings account for those emergency moments. Beyond the recommended three to six months’ worth you should try to have saved up, you can also save for short-term goals like vacations, purchases, and more.
When it comes to the long-term, you can start saving for a down payment on a house, a larger purchase like a car, or another long-term savings goal. By keeping on top of your savings, you can slowly build a secure safety net for your future retirement, among other things.
Money Market Accounts: How They Work
A money market account allows you to use a debit card, checkbook, or wire transfer to access the funds in the account. They don’t have unlimited withdrawals like the traditional checking accounts, but they do often earn a higher interest rate, and they fall somewhere between checking and savings accounts for utility. They are also NCUA/FDIC insured.
If you want to access your money market funds, you can visit a branch and take money out either through an associate or via the ATM. You also get a checkbook and can order a debit card with this account type. There are other potential requirements for a money market account, and one of those is a minimum balance, but if you have some funds and would like to earn a healthy interest rate on them, check out how a money market account can work for you.
In the End
Remember, you don’t have to choose just one type of account in your quest to save money. If your goal is putting aside funds for the long-term, but you may also need to access some of the money during different parts of the foreseeable future, perhaps considering a savings and money market account is the answer. Whatever the case, your local credit union has all the information to help you make the right choices.