There are different types of bank accounts. Each of which has its own purpose. Depending on your needs, these accounts are actually beneficial as it can significantly help you with money management. Being able to understand what it is that you need can help you decide which bank account you’d open or go for. It allows you to minimize the fees and maximize the potential interest that you can earn.
Listed below are the types of banks and credit unions that offer the usual account needed for a day to day transaction:
Let’s start off with the basics, which is the savings account. It is usually the first bank account opened. Almost everybody can open one, even students and children (with the supervision of their guardians). It can help the younger generation develop a habit of money management and savings. It is also an ideal outlet to put emergency funds, where you can easily withdraw when the need arises. Secondly, opening a savings account can help you build a name in certain financial institutions.
Pro: It is easy to open a savings account. It can be a stepping stone for kids and teens to learn the basics of money-saving.
Cons: It has a low-interest rate compared to other accounts. It cannot allow debit purchases. Moreover, it has a certain number of bank limits when it comes to withdrawals in six months.
Short Parenting tip: Have the kids do household chores and pay them by putting money on their savings account.
Checking accounts are ideal for businesses and individuals who have checking transactions. It is intended for depositing checks, bills payment, and withdrawals. As technology progresses, however, the need for paper checks started to subside. Despite the lack of demand among paper checks, the accounts are still on-demand as it helps streamline payments.
Pro: it is essential for some, as it is a pre-requisite for most transactions.
Con: it is often linked to several fees if the minimum balance requirement is not met.
Money Market Accounts
If you’re looking at investments, money market accounts are something to consider. It offers higher interest compared to savings and checking. It combines both features for checking and savings accounts. Individuals who have higher balances need a money market account. This is ideal for those who’d hold an average balance of $5000 up. It is an excellent place to store emergency funds with a higher amount.
Certificates of Deposits
CDs or Certificate of Deposits works best for those who won’t be spending their funds anytime soon. It is usually used as an account to hold deposits as long as six to eighteen months. It’s like having a time deposit while it allows you to earn a higher interest rate. Although it might sound easy for some, pulling your money out earlier than the set timeframe is quite a challenge. There would be specific penalties. Although rarely, some banks would refuse to allow the withdrawal of the funds until the end of terms.
Retirement accounts are no fuzz investments. If your employer would opt to offer such benefit, go ahead and avail of the offer. It is a good start to save for the future. Retirement planning may take some time to be considered, especially if you’re still unsure which career path you would settle in. It is best to consult a financial advisor regarding the matter before fully diving into the investment.