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Course: Financial Literacy > Unit 2
Lesson 3: Saving money- Why and how to save
- Why and how should I save money?
- Planned and unplanned expenses
- I am ready to save. What is the next step?
- Saving wisely: emergency fund
- Emergency fund
- Saving wisely
- Saving wisely: planned expenses
- Paying yourself first
- Pay yourself first
- Paying yourself first
- What are different types of savings accounts?
- What is interest and how does it work?
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What are different types of savings accounts?
Learn about the different types of savings accounts.
Choosing a savings account
A savings account is a great way to save money, earn interest, and grow your wealth over time. But with so many different types of savings accounts to choose from, it can be tough to decide which one is right for you.
Consider your goals
First and foremost, consider your goals. Are you saving for a specific purchase, like a car or a house, or are you just looking to build up an emergency fund? Knowing what you're working towards will help you choose the right account for your needs.
Think about initial deposit requirements
Some banks have minimum initial deposit requirements for their savings accounts. If you're starting off with a small amount of money, this could be an important factor to consider.
Consider access restrictions
Different banks have different rules about how often you can withdraw or access your money. Some will let you withdraw from your savings account as often as you like, while others have restrictions on how many times per month you can access your funds. Make sure you understand the rules before signing up for a savings account so you don't run into any unpleasant surprises.
Shop around
Finally, don't forget to shop around. Each bank has its own set of features and fees when it comes to savings accounts. Compare them to find the one that best suits your needs.
Traditional savings account
A traditional savings account is the most common type of savings account. Banks will usually offer you a small amount of interest for keeping your money with them. Interest rates are typically low, but these accounts are usually a great place to start, as they are easy to open and come with no fees.
High-yield savings account
A high-yield savings account usually offers a higher interest rate than a traditional savings account. This can be a good option if you want to grow your money faster, but there may be some restrictions, such as a minimum balance requirement or withdrawal limits.
Money market account
A money market account is a type of savings account that usually has a higher interest rate than a traditional savings account. You may be able to write checks from a money market account but these accounts may also have fees.
Certificate of deposit (CD)
A CD is a type of savings account where you agree to keep your money with the bank for a certain amount of time (a couple of months to a couple of years). In return, the bank will give you a higher interest rate. If you withdraw your money before the time is up, you may have to pay a penalty.
Want to join the conversation?
- could you explain more about the money market account? i couldn't understand.(9 votes)
- Companies need "short-term" cash (borrowing for only a few days or weeks). Banks are happy to loan out that kind of money, because they can make good interest on the loans. When you put your deposit into the money market, the bank loans it out on the short-term market and makes more on it, sharing a portion of that added income with you in the form of higher interest.(41 votes)
- My eyes hurt from how bright the screen is. Why doesn't Khan Academy have a dark mode? Does anyone have any advice? I've tried the Windows high contrast settings, but it affects EVERYTHING, and I find that really annoying. I have dark mode on, but for some reason it doesn't affect Khan Academy. Help :((10 votes)
- If you would like to support a Dark Mode feature on Khan Academy, you can consider upvoting that community suggestion here:
https://support.khanacademy.org/hc/en-us/community/posts/360067544271-Dark-Mode-setting
You may also consider adding an extension to your device. I use the free "Screen Shader" extension from the Google Chrome Store, which allows me to darken and yellow my Khan Academy screen so it's more comfortable for my eyes. It's customizable and you can easily turn off the setting at any time. Hopefully, adding an extension like the one I've mentioned may help you avoid the hassle of changing your entire device's brightness settings.(19 votes)
- This should be in the thankyous, not the questions.(0 votes)
- If we do withdraw money from a CD account before the set time period, what are some examples of the penalties?(4 votes)
- Let's say that regular savings interest was 1%, and your CD was earning 3%. If you retire early, everything above the 1% that you had earned on the CD would be taken back, and your original deposit would be treated as if it had only earned 1%.(7 votes)
- This should be in the thankyous, not the comments.(1 vote)
- Money market accounts and high yield accounts I never heard of before in this manner. I thought high interest rates were always a bad thing.Also, I hate banks and are there other alternatives then using one to avoid issues with the law. Any open suggestions.(3 votes)
- High interest rates are bad when you are borrowing from the bank. e.g. in a credit card.(4 votes)
- Unrelated to the article but is there a way where I can turn on notifications so I get notified when someone replies to a comment/question? I never get any and idk if anyone has or not.(2 votes)
- A blue circle should light up next to your name in the top right corner.(4 votes)
- How do the banks earn money from the other types of savings accounts (e.g. CD, Money Market Account, and a High-yield savings account) if the interest you earn from the money you put in the account is higher but there are no initial fees?(2 votes)
- Banks usually invest your money into a market, and some of the money they earn is returned back to you. Consider the money you deposit into a bank as being similar to investing in a company.(4 votes)
- Is this best option if I had extra money and did not need it for awhile?(2 votes)
- If your extra money is enough to reach the minimum amount to get a certificate of deposit, and you are able to wait, that can be an excellent option. Talk to your banker.(4 votes)
- I'm looking for more information about APY on savings accounts specifically "high-yield" I want to better understand how lets say 5.50% impacts 1000$? It seems that may change depending on the account and how/when interest is compounded...(2 votes)
- Ok, I may be wrong but I'm giving it a shot. Since you have $1000 and the interest rate for the account is 5.50%, multiply the interest rate by the amount of money that you currently have. In this case, you should do 1000x5.50 (money times interest). And yes, the interest rate does change depending on the account and when the interest is compounded.(3 votes)