Where do you store your money after being paid your salary or earnings from your business? Do you withdraw them and hide them somewhere you think it’s safe in your house? Well, keeping huge cash at home is a big risk that’s worth avoiding. Put yourself in this situation, you’ve been unemployed for a long time, you get your dream job and you start to build your mum a nice house. After getting paid, you decide to withdraw all the cash and keep it in the house, then, unfortunately, the fire broke in that house and nothing is saved. What happens? Your money is gone, construction project stops and the worst is you kill your mother’s hope. Why? Just because you didn’t want to make use of a bank account. Different types of bank accounts exist to satisfy all your needs. Whether you want one that has no minimal savings or one that earns you interest, there’s always a type of bank account for everyone.
Types of bank accounts
This is the most common type of bank account. It allows you to easily access the money you deposit on a daily basis. It has no minimum balances but you’ve got to have enough to cater to your purchases to avoid overdrawing your account which would result in paying of regular fees. These fees are the accumulated amount that the bank pays for your purchases due to inadequate cash in your checking account.
Are you looking forward to earning interest from your savings? This is the account to have. A saving account allows you to earn interest from the deposited cash. However, you’re restricted on the number of times you should withdraw or transfer funds in a month. Additionally, you’re required to have a minimum balance in your account.
Make money accounts
This can be said to be the cross between the checking and the savings accounts, but it offers a higher interest rate than the savings account. Like the savings account, you’re also limited to six transfers or withdraws in a month via the debit cards or a check exclusive of personal and ATM withdrawals/transfers.
(CDs)Certificate of deposits
Are you an investor who is not into high-risk? Well, CDs gives you the opportunity to invest your money while taking a low risk. What happens is that you’re required to invest the cash over a given period of time and earn either a variable or a fixed interest rate. A fixed interest rate means that you’ll be earning a certain percentage on the money you deposited until the certificate of deposits matures. Longer periods usually offer a higher rate than the short periods.
Wondering if you can withdraw the money before the maturity of the CDs? YES, you can, but you’ll have to pay an early withdrawal fee.
(IRAs) Individual retirement arrangements/account
Are you thinking about your future or that of your children? Saving some cash to cater to you when you retire is a wise decision that has secured many from suffering in their old age. This type of bank account offers people a chance to save for their retirement. You are supposed to access the funds after turning fifty-nine and a half years with early withdrawal being subject to some penalties. There’re two types of IRAs, that is:
- Roth. This account requires deposits to be made after they’ve been taxed and has no age limit as to when you should start withdrawing.
- Traditional. The earnings are deferred, withdrawals are taxed and you can’t withdrawal until you reach seventy and a half years.
This type of bank account gives you the opportunity to invest your money in bonds and stock. You earn profits by trading the stocks as well as dividends from the company when it distributes its earning. This is a high-risk investment but with a great potential of growing over a long time.
Types of banks
There exist different types of banks offering the above type of bank accounts. Let’s briefly look at some of the banks
These mostly offers savings and checkings accounts and views the general public as their customers. You can get a loan and a credit card from these banks.
The main focus of these financial institutions is on business customers. However, that doesn’t mean they don’t accept deposits from the general public. They offer short term loans and charges interest. They have a large number of transactions as compared to the retail bank and have more complex services. Some of the deposits that a commercial bank accepts include:
These help you to trade in financial markets, that is, where currencies and bonds are traded. For instance, they assist companies/businesses to borrow money from the public by issuing public bonds. They offer long-term loans to businesses.
This is a non-profit organization that aims at managing and regulating the monetary system of a country. Its functions include:
- Issuing deposits
- Acting as a government’s bank
- Controlling credit
- Maintaining the foreign exchange reserve
These are firms that are owned by customers/investors with the same characteristics and offer the same services as commercial and retail banks.
These operate online and has no physical locations. All their services are offered and completed online.
They offer medium and long term agricultural credit to farmers.
Saving and loan banks
They accept deposits from the customers and then lend them to another.
Banks offer a wide range of accounts that you can open to help you achieve your goals. Therefore, when you’re deciding to have an account, consider going for the one that offers the option that suits your needs. Discuss with them what your expectations are and then make a choice. Remember that you can also open different accounts with different banks. This means that, if you can be having a retirement account with one bank and a brokerage account with another. It’s all about securing your money and benefiting from it.