Are you looking for an easy way to build liquid savings? If your answer is yes, you have two really simple solutions – open a savings account or a money market account.
Typically, savings accounts are of two types: a passbook account and a statement savings account. If you have a passbook account the bank will generally give you a booklet, which will detail all your transactions as and when you make them – cash deposited or withdrawn, the amount of interest paid etc. But if you are a statement account holder the bank will issue a statement for your savings account only once a month. This statement will list all your transactions only for that particular month, and nothing more.
The biggest advantage with both savings accounts and money market accounts is that they are liquid and allow you to withdraw money at your convenience. But remember that there are monthly limits on the number of transactions that you can make.
Another benefit with a savings account is that the minimum balance requirement can be sometimes as low as $1. But make sure your read the information brochure carefully because a large number of banks can ask for minimum deposits ranging from $100 to $1,000 to avoid paying a monthly maintenance fee.
If you are looking forward to earning great interest on your savings, both savings and money market accounts would not fulfill your expectations even though the latter pays better interest. For a better return you can choose high-yield savings and money market accounts. These high-yield accounts are different than the regular accounts in so far as you would have to open and operate them online. This means you would get e-statements, e-transfers and would have to use a debit card.
While many people would hesitate to open an account online, it can actually, if managed carefully, save you from long queues at the bank and make your transactions much simpler and faster.
You can also use your savings or money market account to save some contingency money, especially if it is a high-yield account. Saving enough money in these accounts can support you in a financial crisis, like when you lose your employment or face big losses on the stock market.
Since both savings and money market accounts are currently insured by up to $250,000 by the government, you would never have to worry about the safety of your money.