Short-term goals, long-term goals, emergency funds … it can start to feel overwhelming when you try to save for so many objectives with one savings account. You can make it easier to keep your money organized and to track your progress by separating funds into multiple accounts. And, if you choose different types of accounts that are better suited for specific goals, then you can stretch your dollars further and reach your goals sooner. First up, let's talk about savings accounts.
What's a Savings Account?
A savings account, like a checking account, is a type of deposit account that’s federally insured. You’ll earn guaranteed interest on deposits and won’t lose money. These accounts are perfect for an emergency fund, or short- or medium-term goals since you can take out money at any time, although your number of monthly withdrawals may be limited (savings accounts are meant to encourage saving, after all).
The main features of a savings account include:
interest, helping your savings grow
liquidity, letting you easily access your money
federal insurance, meaning you’ll never lose money you deposit*
automatic deposits, making the process of saving that much easier
You may also choose to use a specific type of savings account called a club account, or as it's known at Navy Federal, a SaveFirst Account. Many use these accounts for holiday or vacation saving, but you can use a club account for any short- or medium-term goal. While you can withdraw from a traditional savings account at any time, club accounts generally have a maturity date. This means there might be a specific date on which you agree to withdraw the money, and you receive more in interest or dividends in return. If you withdraw before that date, you may be charged a fee.
*NCUA/FDIC insurance is up to $250,000 per account ownership category.
When to Use a Savings Account
A savings account is a great way to help you anticipate the unexpected, while planning for the expected. Since you'll have access to the money fairly quickly, here are a few life events where having a savings account will pay off, big time:
- Travel. Save up for your next vacation by auto depositing a set amount into your savings account each month.
- Unforseen Costs. You'll be thankful for a well-stocked savings account should you run into unexpected expenses like the loss of a job or when you need repairs to your car.
- Special Occassions. The holidays come around each year, but are you always prepared? Depositing into your savings account is a smart way to pay for gifts. The interest you earn can help you reach your goals faster.
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