Can banks make your money grow?

Yes, money cannot grow on trees but your banks can help you with that problem. The problem with keeping your money in a sock drawer is that it does not grow in value. For example, your childhood savings of US$100 will remain at US$100 even after 10 years. Although there is really nothing lost, you realize that due to inflation, your money wouldn’t amount as much as when you first stuffed it with your socks.

Today, banks can give you many options with which you can begin storing your money. Checking accounts are a type of transactional account which enables you to have a source of money at your disposal. However, your money will not grow very much in this type of account. There is also an interest-bearing checking account which will allow you to earn with a higher interest. Unfortunately, your interest is dependent on how high your balance is.

Many people begin with a basic savings account because it hardly requires any maintaining balance. Usually, a basic savings account will not allow you to write checks. You may withdraw or deposit money at any time and as often as possible from the tellers. The interest rates of a savings account are generally higher than that of a checking account—regardless of the balance in your account.

However, savings accounts have lower interest rates compared with money market deposit accounts. This type of account also requires a higher maintaining balance compared with the savings account. Moreover, the restrictions on a money market account discourage frequent withdrawals by giving a specified number of preauthorized withdrawals per month (usually set at around six).

Lastly, a certificate of deposits account is a type of “time deposit” where the account owner agrees not to touch the account for a specified amount of time—from a minimum of around three months to six years. This account offers a very high interest rate and the interest also increases as the duration increases. Should the owner decide to withdraw early, there are very heavy penalties. So as much as possible, the owner should avoid breaking into their account.

Basically, there are many different types and they cater to certain needs of the depositor. If you want your money to grow considerably and still remain flexible, it is highly recommended that you open a money market deposit account. This way, you will be able to withdraw some of your money while letting the principal grow.