Saving is the foundation of financial wellness and building your wealth, and a good avenue to that is through putting money away in a savings account. However, financial needs and goals change along with age. Since that is the case, the type of savings account that suitable for you may also vary as you grow older.
To help you maximize your money and boost your savings, here are different types of savings account that are suitable for particular age brackets.
Toddlers to Teens
Old habits die hard, so when you instill the habit of saving on your child early on, he or she will have a hard time departing from it.
The ideal savings account for toddlers and teens is a basic savings account, which the parent will apply for the under the child’s name. With this account, parents can automatically transfer an amount to their child’s account. This is a good way to teach them about money management and savings, especially if you deposit their allowance in this account.
Meanwhile, if the account is used solely for the purpose of saving, it’s important to set a rule on when it is valid to dip into this account. Set boundaries to make sure that they will not end up spending their savings on a whim on things that are not really necessary.
You can also try developing goals with them and giving rewards once their savings reach a particular amount. This practice teaches them the art of delayed gratification and helps them stay focused on saving.
20-Somethings
Because this generation is on-the-go, tech-savvy and not inclined to go to an actual bank, it is advisable for them to apply for a savings account through online-only banks or direct banks. These institutions offer convenience and fast-paced services that’s suitable for a twenty-something’s lifestyle. With just a few taps and swipes on their smartphones or a few clicks on their computers, those who are in their 20s can easily grow their money and manage their finances.
Usually, direct banks have no minimum balance requirements because they don’t have overhead costs as compared to traditional banks.
30-Somethings
Priorities change as a person grows older and once you reach your 30th year, your finances become more complex and your goals demand that you need to be financially well. That’s why a money-market account is more suitable for this age group.
Money market accounts are designed for long-term savings and offers higher interest, thus making your money and savings grow considerably.
Unlike traditional savings account, a money market account has a higher maintaining balance and allows minimum withdrawals, transfers and check issuances each month. Since it’s restrictive and only permits minimal access, it prevents you from using this fund for impulsive spending and enables your money to grow overtime.
This type of account is insured by the FDIC and there may be monthly fees associated with it.
40 to 50-Somethings
At this point, you need to be more serious about your retirement goals and growing your nest-egg. Since that is the case, experts advise that you sign up for a high-yield savings account.
A high-yield savings account, as its names suggests, is designed to yield a higher interest than a regular savings account. This account requires a high initial deposit and maintaining balance, but it offers more flexibility with the number of transactions that you can do as opposed to a money market account. More so, the interest rate of a high-yield savings account can be the same level or even more as what the money market account offers.
You can connect your checking account and automate transfers and deposits in your high-yield savings account.
Apart from looking at your age, it’s also vital to know what your financial needs and goals are when choosing a savings account. Keep in mind that the best choice will still be dependent on your financial strength, needs, and objectives.
Photo credit: Lending Memo
