The key factors to consider when choosing a savings account are the interest rate and the timeframe in which you need access to your savings. Below, we provide an overview of the characteristics and conditions of various types of savings accounts.
Regular Savings Account
A “regular” savings account, also known as a “freely withdrawable” savings account, comes with the following features:
- You can withdraw funds from the savings account at any time without incurring costs.
- You have the flexibility to deposit funds into the savings account whenever you wish or set up regular monthly deposits.
- It’s possible to have no money temporarily in the account.
- The interest rate on this savings account varies over time.
Savings Account with Conditions
These savings accounts vary from bank to bank and by type, with differences primarily related to:
- How flexible you can deposit money into the account: with some accounts, you are free to deposit money whenever you want, while with others, you are required to deposit a specific amount each month.
- How flexible you are in (fee-free) withdrawals: some accounts require you to notify the bank a certain number of days in advance, such as thirty or ninety days, while others stipulate that the money must remain in the savings account for a certain period to earn (additional) interest.
- The interest rate on these savings accounts also varies over time.
Fixed-Term Deposit Account
A fixed-term deposit is a savings account where you lock your money away for a longer period, such as five years for a 5-year deposit. The options available differ from one bank to another, with choices ranging from 1-year deposits to 20-year deposits. Usually, the longer you lock your money, the higher the interest rate, and the interest rate remains the same throughout the entire period.
- You deposit a lump sum at one time, and additional deposits are not allowed until the end of the agreed-upon period.
- You cannot withdraw money during the specified period; the initial deposit remains in the account throughout the agreed-upon period.
Other Savings Methods
Apart from using a savings account, there are alternative ways to set money aside, such as bank savings plans or investments. The choice depends on your financial situation and goals.