Traditional Savings Accounts
You know you want to save and invest your money somewhere, but you don't know the best place for your money. There are many options available to the average consumer: a certificate of deposit, stocks, money markets, IRA's or traditional savings accounts. A traditional savings account is a simple, safe option for any consumer.
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Background
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You can open a traditional savings account at just about any local bank or even through an online bank. Credit unions, savings and loan associations and mutual savings banks are all also options for opening your traditional savings account. A traditional savings account offers consumers an easy way to save money without having to deal with any sort of money manager.
Interest
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The interest you earn on your investment depends on where you open your savings account. Interest rates on traditional savings accounts are much lower than other investment options such as money markets. The interest rate can vary, but is usually under 1%. It may compound daily, quarterly or annually. Banks may also offer plans for higher interest rates as your balance increases. For example, you may earn a higher interest for keeping $10,000 in your traditional savings account compared to keeping $1,000.
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Benefits
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A major benefit of a traditional savings account is the liquidity of your money. One reason for the lower interest rate of traditional savings accounts is because your money is more accessible. Some banks offer the option of linking your savings account to your checking account for overdraft protection. You can also easily transfer money back and forth between accounts without facing any penalties. Most savings accounts can also be accessed through an ATM if you want to take money out.
Safety
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Traditional savings accounts are one of the safest investment options available. Although the interest rate is low, there is no risk of losing any of your money. Your money is also insured through the Federal Deposit Insurance Corporation for up to $250,000 as of 2010. The FDIC was created by the United States government in 1933 to protect funds placed in banks and savings associations. According to the FDIC website, no depositor has lost any money insured by the FDIC since their creation.
Considerations
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While there are many benefits to opening a traditional savings account, you must also consider a few other factors. Some banks require a minimum deposit to open a traditional savings account. The amount can be as small as $25 or as high as $10,000 depending on what type of traditional savings account you plan to open. Some banks may also charge a "maintenance fee" if you don't keep a minimum amount of money in your savings account.
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References
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