Types of Accounts

Savings accounts are commonly categorized into two different types. Passbook accounts allow you to write checks and record deposits, withdrawals and interest rates, but offer little in the way of interest. Higher-yield accounts, such as money market savings accounts, do not offer passbook access; in other words, you can’t write checks or record transactions like you would in a passbook account. Instead, you can access your funds through transfers to your checking account, for example, and, in exchange for the stricter guidelines, higher-yield accounts offer a higher interest rate on your investment.

Liquidity

Unlike investments in stock and bond funds, you can access your money at any time when you place money in a savings account. This liquid function of a savings account is appealing if you think you’ll need access to the money quickly. With low interest rates, placing a large sum of money in a savings account may not be the best choice for a long-term growth investment plan, but it is an effective holding place for emergency funds or money you know you will need to access in the near future.

Usage

References

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