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Maximize Your Savings with O1ne Mortgage

Having a savings account is a crucial part of financial wellness. It allows you to save for specific financial goals while earning interest on your money. It also keeps your savings separate from your checking account, reducing the temptation to spend it.

Understanding Savings Accounts

As common as savings accounts are, you may not know some of their key features. Understanding how they work can help you get the most out of your account and maximize your savings. Here are eight must-know facts about saving money.

1. Different Types of Savings Accounts

The right type of savings account for you will depend on your savings goals and how accessible you need your funds to be. Below are some options:

• Traditional savings accounts: Typically offered by banks and credit unions, these accounts tend to have low annual percentage yields (APYs). As of June 2024, the average interest rate on a traditional savings account was 0.45%.
• High-yield savings accounts: These accounts offer higher APYs than traditional savings accounts. As of June 2024, some rates were as high as 5.30%.
• Certificates of deposit (CDs): A CD offers a fixed interest rate for a set amount of time. After making an initial deposit, your money will be locked into the account until the CD matures.
• Money market accounts: These accounts are a mix between a checking account and a savings account. Your money will earn interest, and you’ll also have a debit card or checkbook to make withdrawals.

2. Minimum Deposit Requirements

It isn’t uncommon for banks and credit unions to require a minimum opening deposit. This amount varies from one financial institution to the next—and some accounts don’t require it at all. Opening deposits for brick-and-mortar accounts usually range from $25 to $100. Most CDs require $500 to $2,500 or more to get started.

3. Savings Accounts Are Insured

Savings accounts offer much more stability compared to investment accounts. The Federal Deposit Insurance Corp. (FDIC) insures bank savings accounts for up to $250,000 per depositor, per insured bank, and ownership category. The National Credit Union Association (NCUA) offers similar protection for accounts at credit unions.

4. Withdrawal Limitations

Some financial institutions charge fees if you make more than six electronic transfers or withdrawals per month. These policies are designed to discourage consumers from withdrawing their funds. If you’ve met your monthly limit, you might avoid a fee by making an ATM withdrawal.

5. Potential Fees

Savings account fees vary depending on the financial institution—and some charge low fees or none at all. Some common fees include:

• Monthly maintenance fees
• Stop payment fees
• Return item fees
• Wire transfer fees
• Inactivity fees
• Overdraft fees
• Nonsufficient funds fee

Shopping around and comparing different savings accounts can help you avoid unwanted fees.

6. Saving for Different Financial Goals

Savings accounts earn interest, helping you reach your financial goals faster. You can use a savings account to:

• Build your emergency fund
• Save for a down payment on a home
• Set money aside to start a business
• Create a travel fund
• Save for unpaid parental leave

Using a mix of different types of savings accounts can help you keep money for different goals separate and earn higher yields on money you expect to keep socked away for longer periods of time.

7. Retirement Accounts Are Different

Retirement accounts offer benefits that aren’t available with savings accounts. The main ones are:

• Tax benefits: Traditional individual retirement accounts (IRAs) and 401(k)s allow for tax-deductible contributions, which can reduce your taxable income. Roth accounts don’t, but they do open the door for tax-free withdrawals in retirement.
• Employee match: Many employers offer a 401(k) match. If yours does, they may match some or all of your contributions, which is basically free money.

8. Overcoming Common Saving Hurdles

Funding your savings account might not always feel easy. Here are some common hurdles to saving—and how to get over them:

• Surprise expenses: This is why it’s so important to have a strong emergency fund. Whether it’s an unexpected bill or a stretch of unemployment, your emergency savings can help you through it.
• Not being in the habit of saving: Setting up automatic monthly or weekly contributions to your savings account can be a great way to build this muscle.
• Feeling like money is too tight: One way to free up cash is to reduce or eliminate your expenses—and then redirect those savings. Another option is finding ways to increase your income.

The Bottom Line

You can use multiple savings accounts to boost your cash reserves. No matter what your strategy looks like, be sure to understand all account fees and deposit requirements. That can help you avoid unwanted surprises and get the most out of your savings.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you achieve your financial goals!

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