Ah, savings. You’ve heard it all before – those financial experts droning on about “Pay yourself first!” or “Always save 10% of your earnings”, which only makes you wonder if they’re really living in the same world! Well, we’re not going to lecture you here, we’re simply going to provide you with some useful information in hopes that you can make the most of the money you are saving each month…no matter how little (or much) that may be.

Let’s spend a bit of time talking about the different types of basic deposit accounts that sometimes let you earn interest at banks: checking, savings, money market and CD accounts. We’ll then go over IRAs, followed by stocks and mutual funds.

Interest is a good thing
Obviously, high interest rates on debt (think of those double-digit shockers on credit cards) are bad…but when it comes to saving money, the higher your interest rate, the better. So, just how, exactly, can you get the most “bang” for your buck?

Well, for starters, the amount of interest you can earn is, generally speaking, proportional to one of two factors: the amount of money being saved as well as the type of interest being earned. Whereas you are in charge of how much money you put in, the bank and other economic indicators influence the interest rates on the accounts you choose.

It’s also up to you to know the difference between the types of interest-bearing accounts being offered. This includes knowing some specifics: What are the interest rates? How are these rates calculated? Are there penalties for withdrawing and/or transferring money from these accounts? What other terms and conditions exist?
Although every bank will offer something slightly different, here are a couple of general tips:

Interest-bearing checking accounts keep your money easily accessible, BUT pay low interest.

Basic savings and money market accounts put restrictions on your access to your money (taking away temptation for some), but reward you with higher interest rates.

What about CDs?
No, we’re not talking about music here! A CD is a certificate of deposit. Most banks offer a variety of CD accounts, which differ from savings and money market accounts in that not only is your access to cash even more restricted, but it involves investing a fixed amount of cash for a fixed period at a fixed interest rate. At the end of the term you have the option of renewing (“rolling over”) the CD for another term or transferring the money elsewhere. Many banks will automatically renew a CD unless you notify them otherwise, so make sure you have a reminder in the calendar of the maturity date if you do not want this to happen.

In exchange for the tighter restrictions, CDs offer higher interest rates than basic saving and money market accounts. In addition, the higher the amount invested in a CD, the higher its interest rate will typically be.

When choosing a CD, you will want to pay close attention to two figures in particular: The annual percentage rate, or APR, is the interest rate offered for the CD over the course of the year. The annual percentage yield, or APY, refers to the amount of interest earned.

Where to get CDs
You can purchase a CD directly from a bank, or indirectly from a bank by way of a brokerage. Once again, be sure you read the fine print and know of all the terms and conditions, including penalties for early withdrawals, which can be very steep.

Variable rate CDs
This type of CD pays a variable rate of interest rather than a fixed rate. This means that the interest paid will fluctuate during the period the CD is held. Similar to a variable mortgage, the rate will vary according to a pre-set schedule or will track a market index, such as the S&P 500. The advantage to this type of CD is that in exchange for the variable rate, more flexibility is provided to you versus a standard CD. With a variable rate CD, you can make additional deposits and even some withdrawals from the account.

”No penalty” CDs
Often a bank will also offer a "no penalty" CDs that typically have a one- to five-year term. This type of CD allows you to withdraw if before maturity, so long as the money has sat in the CD for a set minimum period of time. Note that by Federal law, it is a minimum of 7 days, but different banks will offer different variations beyond that amount. Theoretically you could keep moving your money around every time you saw a better interest rate for another no-penalty CD, but that would involve lots of monitoring (and extra work) on your part.

IRAs
An IRA, or Individual Retirement Account, allows banking customers to grow their money faster than a basic savings account, and have tax benefits to boot! There are many different types offered, so before choosing one, make sure you go through them carefully and ask the bank any questions you may have. A basic IRA, for example, let’s you deduct your annual contribution from your gross income and you don’t have to pay tax on it. Keep in mind too that you can convert from one form to another, but tax implications will differ. As always, asking questions up front will help you make the most educated decision.

Stocks and mutual funds
You can also access brokerage services through banks, allowing you to purchase stocks and mutual funds. Remember, though, that neither of these types of products are FDIC-insured, so you are taking a higher risk (in fact, you could lose some or all of your money). On the upside, of course, is that you can also make a lot of money – the bigger the risk, the greater the potential reward. Money market funds are the least risky, bond funds are more risky, and equity or stock-based funds are riskier still.

Also, with these types of products there are generally few penalties when you change how your money is allocated. Be sure to compare the mutual funds your bank sells with other mutual funds on the market before you buy: your bank may be a good option, or you may choose to buy these products elsewhere. You also need to understand any fee structures before you buy, since some funds charge fees known as “loads”.