saving options

Posted : February 20, 2018
Last Updated : October 2, 2019

saving options

There are two basic ways to save money. You can open a savings account or you can invest your money. An important difference between the two is that savings accounts are federally insured and investments aren’t. Find out what you need to know about savings products.

With a savings account, you make money by earning interest. The bank pays you interest for the opportunity to use your money. A savings account also ensures that your money is safe and that you have easy access to it.

The Federal Deposit Insurance Corporation (FDIC) insures your money in insured financial institutions up to the maximum allowed by law. The National Credit Union Administration (NCUA) insures your money at insured credit unions. This means that if your financial institution goes out of business and can’t pay you your money, the FDIC or NCUA will make sure that you receive it up to the insurance limit.

The FDIC has an online tool called Electronic Deposit Insurance Estimator (EDIE). It lets you calculate the insurance coverage of your accounts at each FDIC-insured institution.

Savings Products

There are three savings products available at most banks:
  • Money Market Account
  • Certificate of Deposit (CD)
  • Statement Savings Account

Other Savings Products

Electronic Transfer Account (ETA)
An ETA is a low-cost account that provides federal payment recipients with the opportunity to receive their federal payments through direct deposit. The ETA is offered only through federally insured banks, thrifts, and credit unions.

Who is qualified to open an ETA?
Anyone who receives any of the following federal payments can take advantage of an ETA:
  • Social Security.
  • Supplemental Security Income (SSI).
  • Veterans’ benefits.
  • Federal employee salary or retirement.
  • Railroad retirement payments.

How does an ETA work?
The ETA is a voluntary program for both the consumer and the financial institution. Banks, thrifts, and credit unions that partner with the U.S. Treasury to provide the ETA offer an account that features:
  • A monthly fee of $3 or less.
  • At least four cash withdrawals and four balance inquiries per month at no additional charge.
  • No minimum balance, except as required by state law.
  • Debit cards are offered by many institutions.
  • Monthly statements.
  • The same consumer protections as other account holders.

Some banks may offer more or better services for their ETA program. For example, you might have the option of depositing other types of payments into the ETA account. Some institutions may also pay interest.

How can I open an ETA?
You can find participating financial institutions in your area by accessing the website or calling 1-888-382-3311. Participating banks and credit unions must open an account for you regardless of your credit history, unless you’ve previously held an ETA that was closed because of fraud.

College Savings
Why is it important to save for college?
According to U.S. Census Bureau statistics, people with a college degree can earn over 60 percent more on average than those with only a high school diploma. Over a lifetime, that’s a more than $1 million gap in earning potential. It’s wise to consider getting an education beyond high school.

What’s a 529 Plan?
A 529 Plan is an education saving plan operated by a state or educational institution. It’s designed to help families set aside funds to pay for future college costs. There are two kinds of plans: prepaid tuition and savings. Every state offers at least one kind of 529 Plan.

What are the advantages of 529 Plans?
  • Investments grow tax deferred, and distributions aren’t subject to federal tax, and often state tax, if they’re used for eligible college costs of the beneficiary.
  • Plan assets are professionally managed either by the state’s treasury office or by an outside investment firm hired as the program manager.
  • Everyone is eligible; there are no income limitations or age restrictions.

Most college savings plans aren’t guaranteed by the state or by the FDIC. However, some states are now offering 529 college savings plan options that are FDIC insured. Be sure to carefully consider the plan’s investment objectives, risks, charges, and expenses before investing any money.

What are some other ways to save for college?
  1. Buy U.S. Savings Bonds to save for college. This is easy to do through automatic payroll deductions, and earnings may be tax-exempt if qualified.
  2. Consider studying in-state and commuting to college from home to lower tuition, room, and board costs.

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