If you are considering opening a high-interest savings account, but aren’t sure where to start – you’ve come to the right place. Arguably, the most popular high-interest savings accounts are money market accounts and Certificates of Deposit (CDs). While they are similar in some ways, each of these investment options offers distinct benefits to your savings portfolio.
Learn more about the similarities between Money Market Accounts and CDs
Both money market accounts and Certificates of Deposit offer investors high yields for long-term or larger deposits of money and the security of FDIC insurance. With these high-interest savings accounts, the interest rate yielded increases in proportion to the level of financial commitment to the account. Different than traditional savings accounts, which also offer interest-based returns, CDs and money markets come with some restrictions on your ability to access your money. However, the higher financial rewards may make these restrictions worthwhile.
Money Market Accounts and Rates
Money market accounts offer higher rates because they require a higher initial level of investment than other savings accounts, including CDs. While the minimum balance to open is higher for these accounts, the investment is rewarded with higher interest rates than you find on basic savings accounts. Additionally, you can continue to increase earnings on your money market account by contributing to it on a regular basis. As you do so, money market rates will help grow your balance.
Many people will set up an automatic transfer into their account in order to consistently maximize earnings potential and meet personal savings goals. In addition to depositing money into these high interest savings accounts, you can also withdraw money a limited number of times per month. This is sometimes considered a benefit in comparison to Certificates of Deposit which cannot be drawn upon without penalty before the date of maturity.
Certificates of Deposit
In comparison to money market accounts, which require a higher level of investment to get started but give you access to your funds, CDs are rewarded high interest for initial investment in addition to the length of time money is invested. For this reason, you should only choose a CD if you are certain you will not need to draw on the funds before the maturity date.
Most banks offering CDs will have a variety of investment terms, with longer term accounts paying the highest interest returns. In addition, some banks offer breakable CDs, which offer one penalty-free withdrawal of funds.
Choose the high-interest savings account that is right for you
High-interest savings accounts are a great way to multiply your savings potential. In exchange for your commitment of funds, you can earn more interest on your account and watch your dollars grow. The most important thing you can do when putting money into CDs or Money Market Accounts is to choose the account, or combination of accounts, that best fit your needs.
Opening both a CD and a money market account in tandem can be a great way to maximize savings and maintain a level of liquidity. If you need help choosing, it’s always a good idea to sit down with a savings specialist and explore your options.
Sponsored content was created and provided by Citizens Financial Group.