Money Monday – Savings accounts
So now you know how to set up an Emergency Fund but it is to much to fit in a piggy bank. One option you could use are a Savings Account.
A Savings Account is a place to park your money that has little risk and generates a small amount of interest. Be aware of the fees that some banks will charge per month for the savings and get the lowest cost you can find. It is also important to make sure it is covered under the FDIC program so your money is protected. Another benefit you may consider is using the savings account to link to your checking account as a form of overdraft protection. This linking can save you money in the event of an error in your checking account balancing. How it works is that your bank will link your checking and savings accounts together. In the event that a transaction on your checking account will overdraft the account the bank will allow money to transfer from your savings to cover the transaction. There are limitations to how often this transfer can occur during each month so ask your banking representative about Regulation D for all the details.
Another option that you may hear of is called a CD or Certificate of Deposit. A Certificate of Deposit an account that you deposit money in with a specific timeframe that you will not withdrawal the funds while it draws interest. CD timeframes can very from 6 -24 months depending on the bank or financial institution. In the event you withdrawal the money before the specified time you will be charged a fee. The advantage to using CD’s is so that you can know how much interest you will earn, you can tier multiple CD’s to make sure funds come available if needed with out having any fees, and promote saving by making the funds let accessible to impulsive spending.