Props to you for having a little cash—and for deciding to save it. Back in the day when I was about eight, I went with my parents to the neighborhood bank and opened my first savings account. I think I deposited a whopping $10. The stakes are a little higher when you’ve got more coming in—that’s why it pays to know your savings options.
Whatever amount you’re starting with and whatever you’re saving for, ask yourself: How long will I keep my cash there? How often do I want to make withdrawals? How much do I plan to stash? The longer you leave your cash alone and the more you keep in the account, the more interest you’ll usually earn. Here are some of your options:
- Basic bank savings accounts: You’ll earn low interest (around 2%) but in most cases you can make withdrawals whenever you want, and there probably won’t be a minimum balance.
- High-yield and money market savings accounts: You can earn slightly higher interest rates (around 3–4%); but you’ll probably have some withdrawal limits and minimum balance requirements.
- Credit unions: Like banks, but owned by their customers, credit unions usually offer high interest rates on savings.
- Certificates of deposit: If you can leave your money alone for a long time, think about a CD—these earn the highest interest rates of any savings option a bank allows. Just know that early withdrawals can cost you.
For me at 8, I think the goal was saving for a bike. And man did it feel good to take my first spin on that black and yellow Huffy. Saving is the way to meet any financial goal: travel the world, build an emergency fund, buy a car. It’s how to get what you want without going into debt to do it. For more on getting your savings started, visit PracticalMoneySkills.com.
—Liz R.
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