Money Storage
Where your money stays safe and steady
Bank Accounts
Bank accounts are one of the safest and most practical places to keep your money. As opposed to keeping cash in a home, they protect your funds, make it easy to deposit paychecks, and give you secure ways to access and move money. Within bank accounts, there are two main types you’ll use most often: checking accounts and savings accounts.
Checking Accounts
A checking account is the most practical place to keep money you use for everyday expenses. It allows you to easily deposit your income, pay bills, and make purchases using checks, a debit card, or electronic transfers. Most checking accounts are insured by the FDIC (for banks) or NCUA (for credit unions) up to $250,000, meaning your money is protected even if the institution fails. While checking accounts typically do not earn much interest, their value lies in convenience and quick access. Many accounts now offer online and mobile banking, making it easy to track your balance, transfer money, and set up automatic payments. Because you can withdraw funds at any time without penalties, a checking account is ideal for managing daily cash flow and covering regular expenses.
Saving Accounts
A savings account is designed to help you set aside money and grow it slowly over time. Unlike a checking account, it typically earns more interest, meaning the bank pays you a small percentage on your balance. While the rates vary by bank, savings accounts almost always pay more than checking accounts, and high-yield savings accounts can offer even better returns. These accounts are ideal for building an emergency fund or saving for short-term goals because your money remains safe and separate from your daily spending. Although you can withdraw from a savings account when needed, banks may limit the number of monthly withdrawals, making it better suited for holding money you don’t plan to spend right away.
What are low-risk investments? What are they suited for?
When you earn or receive money, one of the most important decisions you’ll make is where to keep it. Low-risk investments prioritize safety and security while providing some return on investment. While they won’t grow your money quickly, they ensure it’s secure and accessible when you need it. There are many forms of low-risk investment, each with their own benefits and drawbacks.
Bonds
Bonds are a way to loan money to a company, government, or other organization. When you buy a bond, you’re essentially the lender. The organization agrees to pay you interest (usually every 6 months or once a year) and return your original investment—the principal—when the bond reaches its maturity date. Bonds are used by organizations to raise money for projects or operations, and by investors who want steady, predictable income without the ups and downs of the stock market.
Pros: Bonds provide regular interest payments, making them a good choice if you want dependable income. They are generally less risky than stocks because the borrower is legally required to pay interest and return your money at maturity. U.S. Treasury bonds, in particular, are considered very safe because they’re backed by the federal government.
Cons: Bonds don’t usually grow your money as quickly as stocks, and their value can go down if interest rates rise or if the organization you lent to runs into financial trouble. They also tie up your money until maturity unless you sell them early, which could result in a loss if market conditions have changed.
Annuities
Annuities are long-term contracts you purchase from an insurance company. You pay a lump sum (or a series of payments), and in return, the insurer promises to pay you a fixed amount of income either for a set period or for the rest of your life. People often use annuities as a way to guarantee a steady income during retirement.
Pros: Annuities provide predictable income and can be customized to pay out for as long as you live, which helps reduce the risk of running out of money in retirement. They also offer tax-deferred growth, meaning you don’t pay taxes on the earnings until you withdraw the money.
Cons: Annuities are less flexible because your money is locked in, and early withdrawals often come with penalties and fees. They can also have high upfront costs or ongoing charges depending on the type of annuity.