There are (at least) 3 different kinds of savings accounts at credit unions and banks.
- Regular or Basic Savings. Used to be called “passbook” savings accounts. Low minimum balance requirement. Allow an unlimited number of withdraws, which may be made at any time. Pay the lowest amount of interest.
- High-Yield Savings. Limited number of withdraws, but withdraws may be made at any time. Pay higher interest (but not as much as certificates of deposit).
- Certificates of Deposit. “CDs” or “time deposits”. High minimum balance requirement. No withdraws until after a specified time (months or years). Pay the highest interest.
If you’re keeping all of your emergency savings and other savings accounts in a regular savings account, the value of your savings is decreasing as inflation takes its toll.
Your savings could be earning a higher interest rate if you put them into certificates of deposit, but then the money won’t be immediately available to you if you need it to take care of an emergency.
A high-yield savings account, which combines the best features or basic savings accounts and CDs, might be just right. You can make withdraws whenever you want (but you are limited to a certain number of withdraws per month), but at least you’re getting some interest that will offset the effects of inflation.
Search the internet, and you’ll will many banks offering high-yield savings accounts.
