Chanelle Bessette, NerdWallet
If you are aiming for a savings goal, you have many options for putting your money aside. Savings accounts, certificates of deposit, money market accounts, cash management accounts and investment accounts are all possibilities.
So which one to choose? It depends on how far away your goal is, how much you hope to earn with your money, and how often you want to access it. Here’s how to choose the savings or investment vehicle that’s right for you.
Factors to consider when setting aside your savings
The characteristics of the different accounts can help you choose the right savings vehicle. When deciding where to put your savings, consider the following:
Access to withdrawals. Some accounts, such as CDs and retirement accounts, charge a penalty fee if the account owner withdraws money before a certain time. If you think you will need your cash in the near future, it will affect your choice of account.
Interest rate. Some types of accounts offer higher interest rates or potential investment income than others. The two factors can also vary depending on the bank or brokerage house.
How far away is your goal. Think about how much you will need to save to reach your financial goal and how long it will take to get there. If this lasts longer than several years, change your mindset from saving to investing.