As wages continue to grow in the U.S., many people who may have put off saving in the past are beginning to think about how they can start setting aside funds for a variety of goals, from education expenses to retirement. Whether you’re looking to create a savings plan for a specific objective or, like many millennials, considering how you can start investing your hard-earned money, the number of options out there can make it hard to find the best products that not only match your savings goals but also maximize your returns.
This post will help you cut through the jargon and give you a brief introduction to many common savings and investing accounts. The products profiled below aren’t just good vehicles for saving, they’ll also help you earn the highest interest rates on the money you set aside. Keep reading to learn more about how to make the most of your savings!
High-Interest Savings Account
If you’ve never saved before and are looking for a good place to start, or if you just want to set aside some funds for a rainy day or short-term savings goal, you might want to consider a high-interest savings account. Many basic statement savings accounts allow you to have very low balances, but they also offer lower interest rates. A high-interest savings account usually requires a larger initial deposit and balance, but it will offer more interest. At CS Bank, our Kasasa Saver high-yield savings accounts offer tiered interest rates based upon your account balance, with a minimum balance of $100.
Christmas Club Account
Christmas Club Accounts, which often have a higher interest rate than traditional savings accounts, are great ways to save for the holidays, as well as for big-ticket expenses you might have at the end of the year, like family vacations. You can save throughout the year, but the money isn’t accessible until toward the end (with our Christmas Club Savings Account at CS Bank, we’ll mail you a check by November 1st). Not only will you earn more interest with a Christmas Club, it will also help you budget for the biggest spending season of the year and create good savings habits along the way. Learn more about the benefits of a Christmas Club account.
Money Market Account
If you have a higher balance in your savings account, you might consider moving it to a money market savings account, which pays more interest than even a high-yield savings account. With money market savings accounts, interest is also tiered, which means the more you have in the account, the higher your rate will be. In exchange for more interest, there are often some restrictions, including having a limited number of transactions each month and higher minimum balances to avoid service charges (at CS Bank, there are no fees for balances over $2,500).
We offer two money market savings accounts: our standard Money Market Rewards Account, and for balances of $100,000 or greater, our Century Money Market Rewards Account. With both accounts, the more you save, the more you earn!
Certificate of Deposit
Certificates of deposit, or CDs, are a different form of savings, more akin to a bond than a savings account. Often earning the highest interest of any of the savings platforms we’ve discussed, you deposit a set amount, which must stay in the CD for a set duration in order to get those higher returns. CD lengths come in a variety of ranges, usually from six months to five years, with higher interest rates associated with longer terms. Once the term is finished you can do with your money as you choose—even roll it into another CD.
If you want to take advantage of the higher interest rates of longer-term CDs but would like to have access to some of your funds sooner, you can work with your bank to create what’s called a CD ladder. With a CD ladder, instead of investing in a single long-term CD, you invest in a series of CDs that come to maturity in succession—for instance, every six months. In this way, you’ll be able to maintain a level of accessibility while maximizing returns.
Many banks, including CS Bank, run regular CD specials. Reach out to us or visit a local branch to find out this month’s specials, or check out our CD Calculator and CD Ladder Calculator to see how much interest you could earn with CDs at CS Bank!
Health Savings Account
While so far, we’ve talked about accounts useful for general savings, there are also a variety of savings products designed for saving for a set purpose. Health Savings Accounts, or HSAs, which allow you to save money for medical expenses, are one of them. HSAs are tax-advantaged, meaning that the IRS allows you or your employer to deposit funds pre-tax, as a deduction from your paycheck, or, if you have an individual account, to use your savings as a tax deduction when you file. Offered as a benefit by many employers, HSAs are meant to be used for out-of-pocket medical expenses that your insurance plan doesn’t cover, including your deductible and copays, as well as healthcare products from sunscreen to first-aid supplies. However, you can only have an HSA if you have a high deductible health plan (HDHP), and your funds usually can’t be used for your insurance premiums. If you have an HDHP but your employer doesn’t offer you a plan, or if you are self-insured, CS Bank offers our own Health Savings Accounts with tiered interest rates and only a $50 annual fee.
HSA accounts might not make a substantial amount of interest year-to-year, but if you deposit the maximum amount each year ($3,600 per individual) and let it grow, they can become an excellent tool for saving for retirement, when your medical expenses may be at their highest. This is because they offer exceptional tax savings—not only are your contributions pre-tax, you are also not taxed on growth from compounding interest, and qualified withdrawals are also tax free. You can even invest a portion of your funds in other kinds of investment accounts, like stocks, bonds, and mutual funds. Lastly, if you’re over 65, you aren’t limited to using your account for medical expenses (though you will need to count withdrawals used for other purchases as income for tax purposes). In this way, HSAs make for a surprisingly fruitful long-term investment option!
Individual Retirement Account
An individual retirement account, or IRA, is another traditional long-term savings tool that allows you to grow a substantial nest egg for retirement by saving a small chunk each year. Interest rates on retirement accounts are generally higher than other forms of saving. In fact, historically, IRAs have had returns of 7% to 10% each year. Not only do IRAs offer great interest rates, like health savings accounts, they also offer substantial tax benefits. For traditional IRAs, you can use your investment each year as a tax deduction. For Roth IRAs, you don’t pay taxes on your withdrawals, once you hit retirement age.
Because interest compounds, the earlier you start saving, the better, but IRAs do allow you to make catch-up payments once you’re over 50 (currently, an additional $1,000 over the maximum $6,000 contribution). Because they are intended for retirement purposes, you’ll need to wait until you’re 59 ½ to withdraw funds to avoid a penalty by the IRS and must begin regular withdrawals by the time you are 72.
If you have a 401(k) at work, you can use an IRA as an additional method of saving for retirement, maximizing your investments. If you don’t have a 401(k), the beauty of the IRA is that you don’t need an employer to sponsor one. You can get them through a variety of investment firms and financial institutions, including CS Bank. We even offer regular specials on our IRAs, with a new high-interest rate each month. You can also maximize your savings when you have an IRA and a primary checking account with us!
Financial Investment Account
If you’re looking to go beyond the standard savings products we’ve discussed, you may want to consider other forms of investment accounts, including stocks, bonds, mutual funds, and annuities. These forms of investment carry a little bit more risk, but also tend to earn higher returns. However, both risk and returns vary widely based on the products you choose as well as sometimes unpredictable market conditions, which is why the best investors create diverse portfolios.
Working with an advisor at your financial institution will allow you to choose the right products specific to your needs and risk tolerance. With CS Bank’s Investment Services, you can meet with one of our highly qualified investment professionals to build your own savings and investment plan. Want to know more about how to start investing? Contact a financial advisor or visit our Investment FAQ page to find out how we can help!
Earn More by Saving with CS Bank
No matter where you are on your savings or investment journey, CS Bank has something for you. From our standard accounts including statement savings, high-interest savings, and money market savings, to our more specific products like our Christmas Club Accounts and certificates of deposit, we can fulfill all your savings needs. If you’re looking to set aside money for healthcare or retirement expenses, consider our tax-advantaged IRAs and Health Savings Accounts. And for those who want to start investing beyond the usual banking products, we even offer one-on-one investment services.
Stop by one of our locations in Eureka Springs, Berryville, Harrison, Huntsville, Holiday Island, AR, or Cassville, MO to see what CS Bank can do for you!