Now you’re ready to save your money and not spend it on foolish stuff. The problem is, you don’t know what type of account to put your money in. Don’t worry about that for a single second; we’re going to help you decide right now which account is best for you.
What is a Savings Account?
A savings account is exactly what it sounds like. You put your money in a savings account to save it. A savings account might have an ATM card attached to it, but there are no check writing abilities. If you want to write checks, then you’ll need a checking account.
A savings and a checking account are two different things. People usually have a savings account and a checking account. The savings account is used for savings, and the checking account is used for day to day expenditures.
Also, the savings account is there in case you overdraw on your checking account and need funds to cover a possible bounced check.
What Is a Money Market Account?
A money market account is similar to a savings account in that you earn interest. You will need to put a considerable amount more in a money market account than a savings account. Typically, you’ll have to deposit at least $10,000 into a money market account.
A savings account usually only requires a deposit of $100. Money market accounts function in many of the same ways as a savings account in that you can spend and withdraw money.
What Is the Difference Between Savings and Money Market Accounts?
We’re going to talk about this in a little more detail. The differences are somewhat glaring in the sense that what you get is vastly different. Also, the interest is much higher on one account from the other.
A Savings Account Is Meant for Those With Less Money
If you’re going to keep a couple hundred to a few thousand dollars in the bank, then a savings account is best for you. The most important thing to remember about a savings account is that you’re supposed to use it to save money. Makes sense, right?
You put your money in a checking account if you want to spend it. If you don’t want to spend the money, then put it in a savings account. Any money that you plan on spending should go to your checking account.
Money Market Accounts Are for Those With More Money
Lot’s more money as a matter of fact. If you are planning on depositing $10,000 or more, then go with a money market account. Why? You will receive much more interest on your deposit with a money market account.
Banks consider money market accounts to be high yield, and that means you’ll get earn significantly more in interest than you would with a savings account. Each bank is different, and you’ll need to ask them how high the interest is before depositing your money.
There’s a Huge Difference in the Number of Transactions That You’re Allowed to Make
You are only allowed six transactions per statement cycle with a savings account. That means you’ll only be able to take out money six times every transaction cycle. Six doesn’t sound like a lot, but if you plan it right, that’s enough.
Those six times should only be emergencies since any spending cash should go into your checking account. Knowing how much money to put into what account is confusing in the beginning.
Just remember you’re limited by the number of transactions you’re allowed to make with a savings account. If you plan on doing more than six, then bump that money over to your checking account to avoid any problems.
Do You Have Access to Your Cash in a Money Market Account?
Yes, you do. You will have access to your money via a debit card. Some money market accounts also have checks that you can use. Not all money market accounts have checks and or cards.
You need to ask the bank before you make your deposit if they have cards or checks. You might find that they have ATM cards, but no checks.
The Deposit Requirements for Money Markets Accounts Aren’t Written in Stone
You should be prepared to deposit at least a few thousand dollars when opening a money market account. The exact amount depends on the bank. You might get away with only depositing $2,500 at one bank while another one requires a deposit of $10,000 or more.
Check their website or talk to someone at the bank and see what they say. You’re not going to be able to get away with depositing less than a couple of thousand dollars, so be aware of that.
Which Type of Account Is Best for You?
The short answer is it depends on how much money you have and what you plan on doing with it. if you have a couple of hundred dollars, then a savings account is your only option. If you plan on spending the money, then put it into a checking account right away.
If you have a couple of thousand dollars and want to sit on it, then check out money market accounts. Those with less than $10,000 shouldn’t feel left out since you should be able to find a bank that’s willing to accept less to start a money market account.
By All Means, Save as Much as You Can
No matter what type of account is right for you, start saving now. If you can’t yet afford a money market account, begin saving today so sometime down the line, you can have one. Put a little money back every time you get paid, and eventually, you’ll be able to open a money market account.
The hope of everyone reading this is that you should be able to one day have a money market account. It might take you a little time, but patience is a must if you want to grow your wealth.