Foreign Perspectives

If you’re considering putting a little money aside, then the range of organisations around that offer savings and the range of products that each offer can be bewildering.

Where do you start?

Although the names may differ, savings accounts are fundamentally a fairly simple product once you strip away all the marketing speak. Your first choice is whether you’re prepared to lock your savings away for a period or whether you need fairly instant access to them.

If you’re starting out with savings, it’s usually best to keep the money in an account that you can access easily, even if you are intending to leave it for some years. That’s basically down to practicalities: you just don’t know what’s around the corner and therefore you may find that you need to access the money much sooner than you’d expected.

If this sounds like you, it’s generally normal savings accounts that you should be looking towards. Although some places retain a passbook option most of the time your choice is between a statement based savings account and an online savings account. Usually, the online savings account will pay higher interest and is normally on offer in more states from a given provider.

Once you’ve established a cushion of traditional savings, you can then look towards CDs. These are essentially fixed term savings accounts and you’ll get a range of time periods from 1 month to, say, five years on offer with each period having different rates quoted. For larger sums (typically $5000 upwards) you can often get what’s called a “Liquid CD” which is basically a higher rate savings account. As with the traditional savings accounts these come in the equivalent of a statement version (”Traditional CD”) and an online version which usually pays more interest.

I’ve taken the terms for the above from WaMu (formerlly Washington Mutual) which is one of the outfits that’s spreading it’s wings. As a former mutually owned organisation, it’s quite noticeable that it retains the typical mutual’s focus on savings and therefore has a wider range of savings products on offer than you’d get from a bank.

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