Where Should You Stick Your Money?

There are lots of ways to put your money to work earning interest, lowering your tax bill, or earning profits from investing. These six questions will help you choose which type of account best fits your savings goals:

What's the money for?

If you're saving for retirement, an IRA or annuity could help you save on taxes. If you're putting away for college, a 529 college savings plan will also lower your tax bill and leave more of the savings for paying those tuition bills.

How much money will you be putting away?

Some types of savings and checking accounts have rules about minimum or maximum balances.

How soon might you need the money?

The general rule here is the sooner you need the money, the less risk you should take with it. For really short-term needs, savings and checking accounts could be your best bet.

If you needed it, how much warning would you have?

Some money, like your emergency fund, should be kept in an account that offers quick access. For example, you wouldn't want to put your emergency fund in a certificate of deposit (CD) because you would have to pay a fee for withdrawing the money early.

What kind of fees might there be?

Some savings or checking accounts charge a fee if your balance dips below the minimum, while others (like CDs and IRAs) charge a penalty if you withdraw the money before a certain date. That doesn't mean you should avoid those types of accounts-just pay close attention to their guidelines.

How much interest will the money earn?

Your goal should be to get the highest interest rate you can while still getting all the other things you need (like accessibility, security, and low fees).

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