Choosing From Among Types of Savings Accounts
When you hear the word “savings account,” you might just think of an account where you deposit your money for safekeeping. In reality, there are a number of different types of savings accounts, each of which is slightly different and has its own pros and cons to consider. The main types of savings accounts to explore include:
- Bond, or Term, Savings Account
- Monthly Interest Savings Account
- High Interest Savings Account
A bond savings account, which is also referred to as a term savings account, is an account that incorporates the bonds system into your savings. Put simply, the money you place in your account is used to purchase certain bonds over a period of time that you determine ahead of time. This type of savings account will offer a higher return on your investment, but your money will be tied up for awhile. Therefore, you need to be prepared to go without that cash for a period of time. In general, you will not have access to your money for anywhere from one to five years.
A bond savings account is an excellent choice if you are looking for a way to invest your money with very little risks. The amount of money you earn from this type of account depends on the account you choose. Most institutions offer a fixed interest rate that you are guaranteed to receive. These savings accounts generally offer the highest interest rates, though you might have to wait until the end of your investment period to actually receive your interest earned.
If you cannot afford to tie your money up for a year or more, you might want to consider the traditional monthly interest savings account. With this account, you will receive a small amount of interest on a monthly basis that is based on the amount of money you have in your account. The amount of interest you earn will vary according to the institution, though you generally are able to earn higher interest rates if you have a larger amount of money in savings.
Unlike bond savings accounts, you will be able to access the funds in your monthly interest savings account whenever you want, though you may have fees levied against you if you access the funds too often or do not provide proper notice. Unfortunately, if you do not have a large amount of money to save, you likely will not make much money on your interest. In addition, the interest earned in taxed as a part of your income.
To get a little better rate of return on your cash, you might want to look into a high interest savings account. These accounts pay a higher interest rate than traditional monthly interest savings accounts. The amount of access you have to the funds in a higher interest savings account will depend upon the institution. In most cases, however, you will have less access to your funds with this type of account than you would with a traditional savings account. At the same time, you are not completely denied access as you are with a bond savings account. For this reason, many Brits find this to be the most attractive option.