When it comes to long-term savings and short-term savings, certificates of deposits (CDs) and savings accounts can play a role in both. Your savings in an FDIC-member bank like Ally Bank is insured up to the maximum amount allowed by law, so deposits in CDs and savings accounts are among the safest places to keep your money.
The Short- and Long-Term Benefits of Savings Accounts. With savings accounts, you can access your money when you need it (within federal transaction limits). "Savings accounts are a good place to put money that is not immediately needed, but is still readily available," says Andy Tilp, president of Trillium Valley Financial Planning in Sherwood, Oregon. "It is a place to save for large annual expenses, such as property tax, insurance payments or holiday gifts. Putting a fixed amount into the account each month [may] allow you to build the balance necessary to pay a large bill without having to tap into credit."
Because you can access your money, savings accounts also may be suited to long-term savings needs a few years ahead, while also allowing for the possibility that you will need the money in the short term. For example, if you have a six-month household emergency fund to tide you over in case of unforeseen expenses or circumstances (such as unemployment, for example) you probably want to leave that money alone. But, if an emergency comes to pass, you will want to have access when you need it.
The "Oh Heck" Fund. Savings accounts also can help cope with less dire situations, says Frank Boucher, owner of Boucher Financial Planning Services in Reston, Virginia. "That's what I call an 'oh heck fund,' for when the check-engine light on your car comes on, for example." And, of course, some repairs come as no surprise, but inevitably loom off in the distant future. If you plan ahead for such needs, a long-terms savings program—with consistent deposits over time—might ease the pain of a major expenditure.
The Flexibility of CDs. Much like savings accounts, CDs also can be used for short- and long-term savings because they typically have terms anywhere from a few months to five years depending on what you choose. Unlike savings accounts, however, CDs aren't really designed for depositing and withdrawing funds. Removing funds prior to the end of the CD’s term will likely result in an early withdrawal penalty.
Ally Bank Has Savings Solutions. At Ally Bank, you can open and fund your account with any amount, whether it's an Online Savings Account, Money Market Account, one of our CDs or even an Interest Checking Account. You get rates that are among the most competitive in the country, and we don’t charge monthly maintenance fees.
Ally Bank is committed to making saving as easy, secure and rewarding as it can be. Learn more at Allybank.com or call live, 24/7 customer support at 877-247-ALLY (2559) today.