Best Short-term Saving Solutions For Your Long-term Goals
With the right savings solution, you can reach your future goals faster! Every savings account type has an interest rate tied to it. This allows you to put money aside, and then let it grow based on the interest rate. Depending on the type of savings or investment account, the interest rate can add up to a decent amount of extra money.
Whether your goal is to save for a new car, a new house, or help secure your financial future, there is a savings account that will give you the biggest bang for your buck.
High-Yield Savings Accounts
Better than a traditional savings account, high-yield savings accounts offer higher interest rates with the same easy access to your money. A traditional savings account is lucky to offer more than .05% for your money, whereas a high-yield savings account can range anywhere from 1% to even as high as 7 to 8%.
All you need to do is open an account, put aside some of your money, and watch it grow at a much higher rate than a standard savings account! Whenever you need the money, you can pull it out at any time without penalty. The biggest drawback to this kind of account is the interest rate changes without warning. Just because you opened the account at 4.55% APY does not mean it will still be at that rate a year later. It is up to the financial institution you bank with to change the rates when they see fit.
Pros: Access to your money & higher interest rate
Cons: The interest rate can change at any point and there may be a minimum balance or transaction limitations
Savings Certificates
Another savings solution that usually offers even higher interest rates for your money is savings certificates. These are offered for specific terms and locked in at a guaranteed rate. For example, you can lock your money in at a 5.01% APY savings certificate and get that guaranteed rate for 12 months. The financial institution cannot change the rate at any point during the term.
Unfortunately, if you need to pull your money out at any point before the term is up, the financial institution will hit you with a penalty. So, if you are going to go this route, make sure you have another savings account available for potential emergent situations.
Pros: Guaranteed higher interest rate
Cons: Can’t access the money during the term without penalty
Money Market Account
This account type operates like a traditional savings account, but with higher balances, like $10,000. Financial institutions will show their gratitude by offering high interest rates for depositing such a large amount. These accounts are designed for people who are looking for short-term investments without tying up large sums of money. It’s a safe and secure way for money to be stored with easy access.
Although, with this account type, financial institutions have a few more restrictions in place, like keeping a large minimum balance in the account at all times and rules in place to avoid doing too many withdrawals during a specified period of time. Before signing up for this account, check the rules so you can avoid incurring unnecessary penalty fees later down the road.
Pros: Designed for large balances with higher interest rates as an incentive
Cons: Restrictions in place to ensure you keep a large amount in the account
Which One Is For You?
All of these savings solutions keep your principal investment amount safe and secure while earning dividends. The biggest thing to determine when choosing one of these accounts is your long-term goal. The goal will play a role in which account would best suit your needs.
- If you plan on reaching your savings goal within a year and have something specific in mind to use the money for, a high-yield savings account is probably your best option. This way, you can access the funds once you reach your goal.
- With a financial goal to save some type of down payment, it may be better to lock up your funds in a savings certificate to ensure it won’t be spent before you reach your goal as well as earn more money towards your end goal.
- If you are looking to the future and you already have a large amount of money saved, make sure you are getting the most out of your money with a higher interest rate option, like a money market account.
Whichever you choose, there is always a savings option to help reach your future goals.