Choosing Savings Options

What are you saving for? An annual summer holiday, an education fund for your children or a longer-term goal like retirement? In order to choose how you want to save your money, you will first need to determine your financial goals. The first step is to set a clear savings goal. Having this end goal in sight will help you when it comes to setting aside a specific amount every month or year to reach that milestone. Whatever your goal, the amount you set aside to get started does not have to be large. To jump-start your savings, consider automating your accounts to transfer the budgeted amount to your savings each month.

Check out this Saving for a Goal calculator to get started.

Once you’ve set your financial goals, it’s time to start saving. Choosing the right savings method depends on a few factors: how much money you hope to save, how accessible you need the funds to be and when you’ll want to withdraw them. It can be daunting to evaluate the complex options available, but if you learn more about each saving vehicle it will be easier to get started.

• Basic bank savings accounts typically offer the lowest interest rates, usually less than one percent. They come with few restrictions on access to your money, and they don’t usually have required minimum balances. These accounts normally associated with brick-and-mortar banks also can be accessed online.
  

• High-interest or high-yield accounts typically pay higher interest than basic savings accounts. However, such accounts are likely to require a higher minimum balance than a basic bank savings account, may charge fees or restrict services available on the account.
  

• Online savings accounts are typically similar to basic bank savings accounts, but they offer higher interest rates because they operate online and don’t involve the overhead that standard banks have.
  

• Credit unions, while not available everywhere around the globe, are like banks, but they’re owned by their members and may offer higher interest on savings.
  

• Automatic savings plans are options you can set up for your savings account. You can choose to automatically transfer a set amount from your deposit account to your savings account every month.
  

• The ability to deposit an amount of money at a fixed interest rate for a predetermined amount of time, with the option to withdraw the funds after the term has elapsed.
  

• Brokered savings products are generally priced higher and are purchased through a brokerage firm or sales representative rather than through a bank.
  

• High deposit savings accounts usually have higher minimum balance requirements, but are low risk and provide higher returns than traditional savings accounts.
  

• High-liquidity savings accounts mean that funds can be withdrawn without a penalty, but the account may come with a required minimum balance and a limit on the number of withdrawals permitted.
  

• Variable rate savings accounts offer variable interest rates that change based on an interest-rate index, resulting in either higher or lower rates than fixed-rate products.
  

• Employer-sponsored retirement plans or pensions are a long-term savings mechanism. You contribute to your fund and your employer matches your contributions, further increasing your retirement fund.
  

• Individual retirement accounts, sometimes also known as personal pensions, are personal savings accounts that enable you to put money aside independently. 
  

• Annuities are investment agreements in which payments to insurance companies are invested for you. The annuities are then paid back on a future date or series of dates.