Types of Savings Accounts

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There are a number of different types of savings accounts, including regular, cash, demand, lock-up and equity savings accounts. Learn about marketing designations that have come about in the savings area with help from a portfolio manager in this free video on money management and financial advice.

Part of the Video Series: Money Management
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Are you wondering what all of those different types of savings accounts really mean? Hi this is Roger Groh at Groh Asset Management. Whether you are putting your money into a regular savings account or a cash savings account or a demand savings account or a lock up savings account or an equity savings account what you're really doing is giving your money to a savings bank and with that cash, telling them how to invest your capital and telling them how long to lock your money up for. Following The Great Depression, the United States divided up the types of banks that could exist and in general there were two separate categories. One were the commercial banks, that was First National Bank which ultimately became CitiBank or on the other hand there might have been Bowery Savings bank as an example of savings banks. If you were in New York you remember both. As a result of the distinction and the law setting up savings banks, they had savings accounts and that was it. They took your savings and they paid you some rate of interest. You had your little book that they gave to you that they stamped every time took money in or put money out and they then took that money and they lent it back out to people in mortgages. Pretty straightforward. The commercial banks could do more. They could take your money in but they could buy mortgages, they could invest in real estate, they could finance businesses, they could do many more things in their loan portfolio than a savings bank could. So within the savings bank area, once the law changed, they had to compete with the commercial banks and they began to brand the savings account name. So they added in instant savings account, what does that mean? It is a checking account. They added in demand deposit savings account, it's a checking account. They added in equity savings account, well that's a savings account that maybe has an equity tied in somehow. They added in CD savings accounts. All that means is they took your money and they invested it in CD's and it might be locked up for a while. They added non-penalty CD accounts, savings accounts. That just means that they took your money and you can get it back without paying penalties. So there are all sorts of marketing designations that have come about in the savings area. Today there is not a big distinction between a savings account, a money market account, and a checking account. All three are now guaranteed by the United States Government and by the governments in most other countries. So go for the yield. I'm Roger Groh at Groh Asset Management. Thank you very much for spending time with me.

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