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Futures Accounts

Advanced Types of Savings Plans

Now that you have learned about basic savings accounts, we can learn about investment accounts.  When you are ready to save more money and get a bigger return on your investment, there are more types of accounts that you can open to continue to grow your wealth.

There are many different types of accounts.  You are in charge, make the best decision that fits your lifestyle, and helps you reach your financial goals. Use the following list for an overview of the various types.

Money Market Account

  • Another type of savings account
  • Higher minimum balance requirements
  • Offers a higher Annual Percentage Yield (APY)
  • May come with limited check writing or debit type of transactions

Money Market Funds

  • Low-risk short term mutual fund investments
  • These types of funds are usually managed by an investment company
  • Although these are low-risk investments the returns aren’t guaranteed or insured by the government.

High-yield Savings Account

  • Higher minimum balance requirements
  • Potential to earn a higher APY
  • Typically not available with brick and mortar banking institutions
  • Available through the online banking institutions

Certificate of Deposits (CD Accounts)

  • This type of deposit requires that you leave your money in the account for a fixed period of time ranging from three months to as long as five years.
  • You choose the period of time you want to leave your funds in the account.
  • The fixed period is also referred to as the maturity period.
  • If you need to withdraw the funds before your maturity date, you will pay penalties.
  • You will typically have a higher Annual Percentage Yield (APY). The longer you agree to leave your money in the account. Usually, that means a higher APY.

Savings Bonds

  • Bonds are a low-risk type of investments because they are backed by the full faith and credit of the United States government.
  • Bonds are a way for the government to raise money from the bondholder (you), and the bond will be paid back at a later time to the bondholder.
  • There are different types of what they refer to as Series. Series, E, EE, and I, stop earning interest at a certain point in time.

529 Plan Accounts

  • These are state-administered tax-advantaged savings plans designed to save money for future educational costs, whether it be to cover primary, secondary, or post-secondary educational costs.
  • There are two major types of 529 plans, prepaid and a savings plan. Prepaid will allow you to prepay for tuition in advance at designated institutions.  Prepaid plans are only available for post-secondary education.  You must check with your college or university to ensure they are participants.
  • The savings plan helps you save with a tax deferral benefit. The funds will typically be invested in mutual funds.  Withdrawals are tax-free if they are used for qualified educational expenses as defined by the IRS.