Savings accounts, certificates of deposit (CDs) and mutual funds serve a common purpose–to help you save and grow your money. But each type of account helps you meet different savings goals. Savings accounts often make sense for shorter-term savings goals that may require penalty-free access to your money. CDs, on the other hand, often make sense for longer-term savings goals because they generally have terms establishing when you can take out your money without paying an early withdrawal penalty. Mutual funds tend to be used for even longer-term goals, such as financing retirement.
If you have $1,000 to put aside and you’re trying to determine which account makes the most sense, the answer may depend on when you expect to need access to your money. Many experts agree that funds you expect to use in the near future should be in a checking account. Any savings you might need in the next three months, likely makes sense in a bank savings account. Bank CDs can be an ideal place for any savings you don’t expect to use within the year, but probably will use in the next five years. For savings you don’t expect to use in the next five years, you should consult a financial planner to advise you whether a mutual fund or other investment is right for you.
At Ally Bank, we offer a wide range of products to help you save and manage your money, including a variety of CDs, the Ally Bank Online Savings Account, and the Ally Bank Interest Checking Account. Learn more at Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.