These days, there are many options when it comes to saving money. There are all sorts of places you can put it, from burying it in the back yard to opening a high interest savings account. Each option has its relative strengths and weaknesses, of course, and different solutions work better for different people. With that said, however, there are some options that are better than others in most cases.
We’ve all heard the story of the three little pigs. Just in case we have a straggler who missed kindergarten through second grade, though, here’s a recap:
- Three pigs decide to move out on their own.
- Pigs build houses. The first pig uses straw, the second uses sticks, and the third uses bricks.
- A hungry wolf decides he wants pork chops for dinner. He likes to be called Big Bad, but we’ve never been that impressed with him. If he was so bad, he’d have gone after a steak instead.
- The wolf blows down the first two houses. Fortunately (unless you were rooting for the wolf) the pigs manage to escape to brother number three’s brick house.
- The wolf can’t blow the brick house down. Depending on the version, the wolf either gives up and goes away or the pigs make wolf stew.
Just like the three pigs and their houses, there are three types of “piggy banks” where you can put your savings. And like the three little pigs’ choices of building materials, there is one that is, by and large, better than the other two. Consider this:
-
- You could put your money into a passbook savings account. Of course, you’ll earn almost as much interest by burying it in the back yard. This does give you the advantage of having your money readily available if you need it, but it’s kind of pointless to allow your money to sit there earning less than 1% interest.
- You could put your money into a CD (Certificate of Deposit). This will pay relatively good interest. The problem is that you won’t have access to your money if you need it until the CD’s term is up, which is usually a year or longer.
- You could put your money into a high interest savings account. This offers you a better interest than a typical savings account. While it admittedly does not offer interest rates quite as attractive as CDs, it does give you more ready access to your money if you need it.
There are sometimes limits on how often you can withdraw money from a high interest savings account. However, these limits are usually not generally a problem if you are using your savings account to save money and withdrawing funds only occasionally.
