The following are some savings options that can yield interest for a bank customer, according to www.thebalance.com.
- Savings bank accounts:
A savings account is the most convenient place to save money, but it may not be putting your money to work.
When using a savings account, it is important to look at the interest rate. Depending on where you bank and what type of account you have, you could be earning a little interest.
The best thing about savings accounts is that they are completely liquid. This means you can access your money on very short notice. You may be able to go online and transfer money from a savings account to a current account, withdraw from an ATM or your local branch.
- Money market:
In addition to your basic savings account, you may use another savings vehicle called money market.
There are actually two money market accounts. They are money market bank accounts and money market mutual funds.
Money market accounts offered by your bank work almost the same way. But since the money held in a money market account is invested a bit differently, there are usually more restrictions on the account.
Although money market accounts generally have higher interest rates than savings accounts, the restrictions on the number of withdrawals per month or the requirements of opening a separate account make these funds slightly less liquid.
- Fixed deposit:
A fixed deposit is another way to save money that is routinely offered by your bank. It is a time deposit, which means that the money you place on deposit must remain there for a specified amount of time before you can withdraw it.
You can purchase a fixed deposit with a variety of time frames; this may be between one month and many years. In most cases, the longer you agree to leave your money on deposit, the more interest the bank will pay you.
Since you are required to leave your money in the fixed deposit for the amount of time selected, this can make your money less accessible than a savings or money market account. This can be a good thing since it encourages you to leave the money alone; but in an emergency where the money is needed very quickly, this can be a hindrance. Fortunately, you can access your money before the fixed deposit matures, but the bank will impose a penalty that could reduce the interest you could have earned.
- Savings bond:
Another possible option for your savings is through savings bond. Savings bonds are issued by the government and are backed by its full faith and credit. Similar to a fixed deposit, every savings bond has a maturity date in which the bond reaches the maximum value. It could be for a considerable number of years.
Savings bonds are credited interest each month and you can cash in a savings bond at any time, although doing so prior to maturity may result in foregoing some interest. You can purchase savings bonds at most banks.
Like fixed deposits, you may encounter liquidity issues with savings bonds since they are purchased separately and you can only receive money from them through redemption at either a bank or by mail.