A checking account is a type of bank account that allows you to deposit and withdraw money on a regular basis. This is likely the type of account you use to pay of your credit card and withdraw money from an ATM.
Benefits of checking accounts are that they are very "liquid" which means there are very few restrictions on when you can withdrawal or add money.
The drawback to most checking accounts is that they often don't offer the user very much interest for storing their money in them.
Any time someone borrows money from someone else they have to pay "interest" or an additional percentage of what they borrowed to the lender. This is a way of compensating a lender for lending out their money. Interest can work against you when you are the borrower (like with credit cards or student loans), but it can also work for you when you put money into an account that earns you interest.
All sorts of accounts will earn you interest. Checking and savings accounts often earn you very small amounts of interest, where as mutual funds and ETFs can potentially help you earn high amounts of interest.
A money market deposit account is a type of account that often pays higher interest rates than a regular saving or checking accounts. It is easy to withdraw money from these accounts, and so it can be a great place to store an emergency fund. Generally you can set up a money market account with your existing bank or credit union.
-Don't confuse money market accounts with money market mutual funds. These are different things.
- You may get better interest from a high yield savings or checking account than you do in money market, so do your research before you decide to use one.
-Some money market accounts come with additional fees or restrictions on when you can remove your savings, so again do your research before setting one up.
Mutual Funds and ETFs are not the same thing, however they share some basic commonalities, and so they are grouped together here.
Both Mutual Funds and Exchange Traded Funds are "portfolios" or collections of numerous different stocks and/or bonds. Both of them allow you to invest in a diverse array of stocks and bonds with minimal work and oversight on your part.
Click the link above to learn more about these types of funds and their uses and differences.
A savings account is a safe and reliable way to save money for short term needs, that allows you easy access to the holdings in the account, while also, generally helping you to earn a small amount of interest on your savings.
These accounts can be a great place to save money for an emergency, or to save up for short term goals like a long weekend trip.