Savings Accounts

There are literally dozens of ways that you can invest your money. Of all of these the simplest is probably a savings account. Almost everybody has had a savings account at some point in their lives. We almost all open one when we are children. However it is usually a good idea to continue to have a savings account even as we get older. A savings account is a very safe and convenient place to keep your money.

A savings account is most basic form of investment there is, it is also likely the first one that you will have. A savings account is simply a bank account that pays interest on your deposit. It differs from a checking account primarily in that you can’t draw checks on your savings account. It does however usually pay a higher interest rate than a checking account does. The main advantage of a savings account is that it is virtually risk free. The money you deposit will just sit there and earn interest. The only slight risk is that the bank that holds your account will fail. Even this is a relatively small risk since your account will be covered by deposit insurance. The only real risk is if have a very large deposit at a bank that fails, a very unlikely occurrence.

The other great advantage of a savings account is that is very liquid. You can go down to the bank and withdraw your money anytime that you want. There are usually no fees for doing this so that helps to increase the liquidity of the account. Of course in exchange for this convenience and safety you are going to get a pretty low interest rate. In general the riskier the investment or the harder it is to turn the investment into cash the more it will pay in interest. Since a savings account is probably the safest and the most liquid investment you will encounter the interest rate is going to be pretty low.

In most cases you will be able to open a savings account at your local bank. In general it is just a matter of going in and filling out some paperwork. You may want to shop around and see who is offering the highest interest rate; there can be a surprising difference. In recent years it has become common for online banks to offer the highest interest rates on savings accounts. These are banks that have no physical branches and only exist on the internet. The only downside of these is that you will need to have an account at another bank in order to get your money into and out of the internet bank. This can be a little bit inconvenient. However if you can get a high enough interest rate on your savings account it might be worthwhile to consider and internet bank.