saving accounts in banking

SAVINGS ACCOUNTS OVERVIEW
When saving your money, you will be placing money in many different types of savings instruments, including very safe and stable investments vehicles. This is especially true for money that you are going to need in the short-term (as compared to long-term investments, such as buying a house). This category includes bank savings accounts and money market mutual funds, some of the safest short term investments.

When placing your money with a bank or money market fund, you earn interest, or yield, which fluctuates, depending on general rates of interest.


TYPES OF SAVINGS ACCOUNTS:
Bank Savings Accounts:
When you are beginning to save, you should place your money in investments that are as safe as possible. In addition, you will likely always have at least some of your money in short-term investments. Bank savings accounts are such an investment. The federal government backs these accounts with what is known as Federal Deposit insurance Corporation (FDIC) Insurance.

Money Market Account:
These are accounts offered by banks. However, in these accounts the bank typically pays you a higher rate of interest than a savings account.

CD or Certificate of Deposit:
The bank holds your money for a set period of time. Usually one to six months, or one to five years. Unlike a normal savings account, you may not withdraw your money at any time. If you do, you will be subject to withdrawal fees.

Money Market Funds:
Similar to bank savings accounts are money market funds. Money market accounts are available from mutual fund companies. They are similar, but you usually get a better return with money market funds. Also, since these funds are not held with a bank, they are not FDIC insured. However, they are invested in very short-term bonds, which tend to be less risky than longer-term bonds and invest in safe government investments, corporate commercial paper, and other related investments. In addition, they are regulated by the U.S. Securities and Exchange commission. Those money market mutual funds that invests exclusively in U.S. government securities have very little risk, while giving you better rates of return then typical bank savings accounts.