What people think it is: Just another savings account.
What it really is: The ultimate short-term savings tool. This is a set-it-and-forget-it account that allows you to save for the things you want or need—like holiday spending, vacations, or the next iPhone (yes, you should probably start saving for that now)—with minimal effort and thought. All you need to do is set your savings goal and your weekly or monthly transfer amount, and it will automatically transfer into your club account. Just remember, your money is locked in the account for about a year, until the set disbursal date. The most common club accounts are intended to save for Christmas, back-to-school, or vacations, but if you’re saving for something else, don’t let the name scare you away. Just choose an account with a disbursal date close to the date you want!
What people think it is: A jail cell for your savings. Not worth locking down your funds for the few extra pennies you earn in interest.
What it really is: A traditional CD is essentially a one-time deposit, in a fixed-rate account, for a fixed amount of time. CDs reward you for locking down your money with higher interest rates than many other products and offer the security of being paid by the financial institution, not by the mercy of the stock market like some other investment products. Yes, there can be a hefty fee for withdrawing money before the CD matures, but depending on the penalty amount and the interest that you have already earned, you may not be losing as much as you think.
Additionally, there are different versions of this product, like
Flex CDs that allow a one-time rate upgrade, additional deposit, or penalty-free withdrawal. This takes some of the worry out of tying your money up for a long period of time. Overall, a CD is a great option to consider for your long-term savings.
What people think it is: Not a clue…
What it really is: Trading in a higher interest rate for flexibility. A Money Market account is one of the most flexible long-term savings accounts around. You can add to it whenever you choose, and the more you deposit, the higher your interest rate gets. You can make a set number of withdrawals from the account every month, and although not as high as a CD, it provides a higher interest rate than most regular savings accounts.
St. Mary’s Bank is a member-owned credit union. Membership is opened with purchase of one share of capital stock for $5. Federally insured by the NCUA.