Creating savings accounts that are secure and diversified are an important step in
financial planning. Options are varied ranging from traditional credit
union accounts and interest based CD's to the new Health Savings Account.
The most important part of a savings account is that it exists. All savings
accounts are beneficial but some will provide greater returns on your investment
than others.
Passbook Savings Account - Traditional passbook accounts provide a booklet to enter deposits, withdrawals
and interest accrued. These deposit accounts are typically insured up to
$100,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit
Union Share Insurance Fund (NCUSIF) if the savings account is at a local
credit union.
New Health Savings Account - Health Savings Accounts (HSAs) were created by the "Medicare Prescription Drug,
Improvement and Modernization Act of 2003," signed into law by President Bush
on December 8, 2003. Health Savings Accounts changed the way millions met their
health care needs because they were designed to help individuals save for qualified
medical and retiree health expenses on a tax-advantaged basis.
Any
adult who is covered by a high-deductible health plan (and has no other first-dollar
coverage) may establish an HSA. Tax-advantaged contributions can be
made in three ways: the individual or family can make tax deductible
contributions to the HSA even if they do not itemize deductions, the individual's
employer can make contributions that are not taxed to either the employer
or the employee, and employers sponsoring cafeteria plans can allow employees
to contribute untaxed salary through salary reduction. The U.S.Treasury has more information on this type of savings account.
Money Market Accounts - A money market account is a type of savings account offered by most banks
and credit unions that is similar to regular savings accounts. The difference
is that the money market accounts usually pay higher interest, have higher minimum
balance requirements, and only allow three to six withdrawals per month. Another
difference is that, similar to a checking account, many money market accounts
will let you write up to three checks each month. The money in a money
market account is insured by the Federal Deposit Insurance Corporation (FDIC),
which means that if the bank or credit union goes out of business your money
will still be secure.
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