Savings accounts are typically accounts offered by financial institutions (banks, credit unions, money market fund companies, etc.) in which you may deposit any excess funds that you have at your disposal in return for a payment of interest. Access to the funds in a savings account may often be limited by the number of withdrawals you are allowed to make within a specific period, although the majority of savings accounts offer ATM cards or even a check book facility to enable “pre-authorized” withdrawals.
In the United States, Regulation D of the Reserve Requirements for Depository Institutions limits the amount of pre-authorized withdrawals that can be made from a savings account to just 6 within a month or four week cycle. What this means to a saver is that your financial institution may charge you for exceeding the maximum number of withdrawals per month (and therefore negate the benefit of having a savings account) or change the status of your savings account to a checking account – where you receive minimal, if any, interest on your account balance.
High Interest Savings Accounts
There are many high interest saving accounts available for people who have a little money to put aside but who may want instant access for their savings at any time. Usually the rates on these high interest savings accounts are variable, and can be changed by the bank or other financial institution at short notice. Some savings institutions will offer fixed rate savings accounts over a specific term, with no access at all to your capital, and these are known as Certificates of Deposit.
By shopping around among the financial institutions which offer savings accounts to customers, you will be able to find the highest yield savings accounts for your budget. Interest rates on savings accounts can be influenced by the amount you are willing to invest and maintain in your savings account, and also by the demand that a specific financial institution has from borrowers – a bank with a substantial demand for loans will need to attract an influx of money.
Health Savings Accounts
Health savings accounts are tax-advantaged savings accounts in which depositors place and save funds towards qualified medical expenses. No Federal income taxes are charged on interest received in health savings accounts, and the funds contained within health savings accounts can be used for other investment opportunities – provided any returns or dividends are then deposited back into the health saving account.
Health savings accounts differ from 401(k) plans and Individual Retirement Accounts (IRAs) inasmuch as funds can be withdrawn at any stage by cash, debit card or check (when such a facility is provided) and used as required. However, savings that are withdrawn from health savings accounts and not subsequently used for qualifying medical expenses will be subject to income tax plus a withdrawal penalty.
Online Savings Accounts
Online savings accounts have started to become a more popular form of saving as opposed to traditional methods. People using online banking facilities from their existing checking accounts are able open online savings accounts and move funds between them with just the click of a button. Due to lower operating costs, online savings accounts often offer higher interest rates than brick-and-mortar establishments, with minimal deposit requirements and the facility to withdraw funds back into a checking account as easily as when they were first deposited.
Savings Accounts for Kids
Parents who want their children to get into the habit of saving money are keen to set up saving accounts for their kids, and banks are equally as enthusiastic for future customers to establish good financial habits at an early age. Consequently savings accounts for kids can usually be opened with just a small deposit, are operated with minimal or no bank service charges and interest is paid free of Federal tax. As the children get older, finding savings accounts with the highest yield might be more important to them but, at this stage, the novelty of just having a savings account will start to teach them about sound money management.
The Best Savings Accounts
The best savings accounts are going to be those which best suit your personal lifestyle and financial situation. Depending on whether your requirement is for high interest savings accounts, savings accounts with instant access to your funds or tax free savings accounts, there are plenty of savings accounts on offer to suit your individual needs. The casual saver with Internet access will find online savings accounts worth investigating, and parents trying to teach their children to save money may find advantages in integrating their savings accounts with their children’s. Overall, it is in your best interests to find a savings account with no bank service charges to ensure that the interest you get on your savings stays in your account.