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Guide to Savings Accounts

If you're building an emergency fund, saving for a big purchase, or getting money together to invest, using an insured savings account can put you on the right road.

1/4/2021 9:00:00 AM

Understanding the Benefits of Savings AccountsGetting Interested

With a savings account, you earn interest, or a percentage of your balance, on the money in your account. This means that your money is constantly growing. What you earn depends on the interest rate the bank pays—which varies by account type.

View our Savings Calculator.

Regular Rules

The most basic accounts, where you can deposit and withdraw money at any time, are called regular savings accounts, or sometimes statement savings accounts. What that means is that any activity in the account—deposits, withdrawals, fees, or interest earnings—and your current balance are reported in a printed or online account statement, usually once a month.
 
You earn interest on a regular savings account only if you keep at least the minimum required amount in the account. If your balance is lower, some banks don't pay interest and others may charge a fee.
 
While you'll certainly earn more in a regular savings account than if your money was in a checking account or no account at all, a regular savings account probably won't earn you tons of extra funds. Whatever the interest rate is, it's likely to be the lowest one the bank offers.
 
Learn more about North Shore Bank’s savings accounts.

Money Market Accounts

Most banks offer hybrid accounts—part checking, part savings—called money market accounts (MMAs) or sometimes money market deposit accounts. They're similar to money market mutual funds, but have the advantage of FDIC insurance.
 
MMAs typically pay higher interest rates than regular savings accounts, and may offer blended or tiered rates, which means you can earn an even higher rate on large balances or on part of your balance over a certain level.
 
And you can usually make a limited number of cash transfers or write a limited number of checks—generally a total of three—against your account each month.
 
The catch is that the minimum required deposit is often higher than with a regular savings account. If your account falls below that mark, you may face substantial service fees, forfeit your interest, or both.
 
Learn more about North Shore Bank’s money market accounts. 

View our Money Market Account Calculator

Luxury Models

Certificates of deposit (CDs) are high-end savings accounts. They generally pay interest at a higher rate than other bank accounts, so it should come as no surprise that there are some strings attached.
 
What makes CDs different from regular savings accounts is that they're time deposits. That means that when you open a CD you agree to commit your money for a specific term, or period of time. You also agree that if you withdraw money from the CD before it matures when the term ends, you'll forfeit some or all of the interest you would have earned.
 
Terms vary by bank – more common terms include six months, twelve months, eighteen months and two years. Typically, the longer the term, the slightly higher the interest you may earn.
 
When a CD matures, you can roll over the money into another CD, transfer your money to a different account, or have the bank send you a check. But you must tell the financial institution what you want it to do by the deadline it sets, or the decision will be made for you. If you do nothing, your money is usually reinvested into another CD with the same terms, but at the current rate.
 
View North Shore Bank’s CD rates. To open a CD, stop by your nearest North Shore Bank office, or go online to schedule an appointment.

Online Coach: Saving with a Purpose

Isn't It Interesting?

When banks advertise the interest rates on their savings accounts, they tell you the nominal rate and the annual percentage yield (APY). The nominal, or named rate, is the rate they pay. The APY is what you earn over the course of a year, expressed as a percentage of your principal.
 
The amount of money you actually earn depends on whether the account pays simple or compound interest. Simple interest is calculated annually on the amount you deposit. With compound interest, which can be paid daily, monthly, or quarterly, the interest is added to your principal to form a new base on which you earn the next round of interest.
 
How can you tell whether interest is simple or compound? If the nominal rate and the APY are the same, you're earning simple interest. If the APY is higher, the interest is compound.

Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today. North Shore Bank expressly disclaims any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release North Shore Bank from any such liability.
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