VM

Savings Account

  • an interest bearing deposit account held at a bank/financial initiation.

    • typically: pay modest interest rate
    • safe/reliable
    • great for parking cash available for short term

  • Limitations on now often you can withdraw

    • Ideal For emergency fund
    • Short term-goals (baying a car, vacation)
    • more surplus cash you don't need in your checking account: get more interest

  • How do they work

    • sources of funds of financial institutions for loans
    • interest rates vary
    • some require a minimum
    • The more competitive the rate the more it will fluctuate
    • balance in order to avoid monthly fees.
    • Earn highest published rate , others have none (balance requirement)

  • Advantages

    • Places to put your money that is separated from everyday banking needs.
    • rainy day / earmark funds to achieve a big saving goal
    • Security - Federal Deposit Insurance Corporation (FDIC).
    • saving accounts earn money
    • impose hefty penalties if you withdraw your funds too early.
    • at the same installation as primary (access very liquid: hard to get the cash)
    • Checking accounts often has convenience and efficient benefits.
    • transfer between accounts.
    • more than one savings account

  • Disadvantages

    • doesn't save like other saving accounts
    • higher news with certificates of deposit/treasury bills
    • invest in stock |bonds.
    • Liquid: key benefits / downsides
    • may tempt you to spend money you have saved
    • More difficult to cash in bonds