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What are the differences between savings, money market, certificate and investment accounts?

When it comes to what to do with the money you've saved (or are working to save), you have many options. How to decide which one is right for you can be a daunting thought, especially if you aren't aware of the basic differences between common types of accounts. Below is a chart explaining the basics of savings accounts, money markets, certificates (CDs), and more here at RCU.

Before diving into the differences between these accounts, you must first understand a couple of terms:

  • Dividend Rate - The amount of money you can expect to earn on this account. Dividend rates are typically quoted with a percentage but, because dividend rates are always changing, this chart will use terms such as "low", "moderate" and "high"
  • Liquidity - How easy it would be for you to add money to or, more importantly, take money from the account once you've made the deposit
  • Accessibility - How you can access the funds you've put into the account
  • Balance Restrictions - The amount of money you must keep in the account to keep it open and/or earning dividends
  • Insured - Whether the funds that you put into the account are protected from incurring a loss. Accounts are insures for up to $250K per Member on personal account and $250 per business entity (not per signer on the account).
Dividend Rate Liquidity Accessibility Balance Restrictions Insured
Savings Account low

deposit and withdraw at any time;
no time commitments

ATM card;
in person (teller)
low yes
Money Market low-to-moderate

deposit and withdraw at any time;
no time commitments

limited transfers;
ATM card (possible);
in person (teller)
low-to-moderate yes
Certificate (CD) moderate not liquid;
penalty assessed if withdrawal is necessary before
certificate has reached its time commitment (term maturity)
in person (teller)
moderate-to-high yes

Due to the large variety of options offered in investment accounts, they are not reflected in the above chart.  Most of these accounts are not liquid, accessibility can be limited, balance restrictions are often high and most investment accounts are not insured.  However, investment accounts offer the highest potential return, making them attractive to those who have no short term plans for their savings.

The above savings vehicles are great for many different saving purposes, depending on your goal. However, when it comes to specific savings goals, such as retirement or education, you may want to dive a little deeper:

If you're looking to save for retirement, Individual Retirement Accounts (IRA) Money Market and Certificate accounts are available as stated above (with liquidity and accessibility differences, given their tax-advantaged status). A discussion with your licensed financial advisor will help you create a savings strategy for your retirement, incorporating IRA Money Markets and Certificates along with any other options that are available to you.

Your financial advisor can also assist you with saving for education: Programs like the 529 Qualified Tuition account can help you save for your own education or that of loved-ones.

Ultimately, no matter what option you choose, keeping your savings in an account with a trusted financial partner is an important step to achieving your savings goals, whatever they may be!