November 25, 2020
If you're building an emergency fund, saving for a big purchase, or getting money together to invest, using an insured savings account can put you on the right track. But it’s not the only way to save money. At Hills Bank, we offer a variety of ways to start saving to keep you connected to your dreams. Those savings options include dedicated accounts, automatic savings goals, special programs, and other options. Read on to discover the right savings vehicle for your needs. But first: a quick note about interest.
Making Sense of Your Interest Rate
With a savings account, you earn interest, or a percentage of your balance, on the money in your account. This means that your money is constantly growing. What you earn depends on the interest rate the bank pays – which varies by account type.
When banks advertise the interest rates on their savings accounts, they tell you the interest rate and the annual percentage yield (APY). The interest rate, also known as the nominal or named rate, is the rate they pay. The APY is what you earn over the course of a year, expressed as a percentage of your principal (in this case, that’s the amount of money you have in the account).
The amount of money you actually earn depends on whether the account pays simple or compound interest. Simple interest is calculated annually on the amount you deposit. With compound interest, which can be paid daily, monthly, or quarterly, the interest is added to your principal to form a new base on which you earn the next round of interest.
How can you tell whether interest is simple or compound? If the interest rate and the APY are the same, you're earning simple interest. If the APY is higher, the interest is compound.
You can see all of our deposit rates here.
Regular Savings Accounts
The most basic accounts, where you can deposit and withdraw money at any time, are called regular savings accounts, or sometimes statement savings accounts. What that means is that any activity in the account – deposits, withdrawals, fees, or interest earnings – and your current balance are reported in a printed or online account statement once per month.
Some savings accounts only pay interest on your balance if you keep at least the minimum required amount in the account. If your balance is lower, some banks don't pay interest and others may charge a fee for holding your money. At Hills Bank, we won’t charge a fee if your savings account balance drops below the required amount to earn interest – and our Free Savings account even lets you earn variable interest without a minimum required balance.
While you'll certainly earn more in a regular savings account than if your money was in a regular checking account or no account at all, a regular savings account may not give you the highest interest rate the bank offers. That’s where other types of accounts shine.
Money Market Accounts
Most banks offer hybrid accounts – part checking, part saving – called money market accounts (MMAs). They're similar to money market mutual funds, but have the advantage of FDIC insurance.
MMAs typically pay higher interest rates than regular savings accounts, and may offer blended or tiered rates, which means you can earn an even higher rate on large balances or on part of your balance over a certain level.
The catch is that the minimum required deposit for money market accounts is often higher than savings accounts. If your account falls below that mark, you may be charged service fees, forfeit your interest, or both.
Certificates of Deposit
Certificates of deposit (CDs) are like high-end savings accounts. They generally pay interest at a higher rate than other bank accounts, so it should come as no surprise that there are some strings attached.
What makes CDs different from regular savings accounts is that they're time-based deposits. That means that when you open a CD you agree to commit your money for a specific term, or period of time. You also agree that if you withdraw money from the CD before it matures when the term ends, you'll forfeit some or all of the interest you would have earned.
Typical terms include six months, a year, two and a half years, and five years. The longer the term, the higher the interest you may earn. We offer a number of CD terms, including specials that fall between these standard options. Unless otherwise specified, the minimum amount to open a CD is $500.
When a CD matures, you can renew or “roll over” the money into another CD, transfer your money to a different account, or have the bank or credit union send you a check. But you must tell the financial institution what you want it to do by the deadline it sets, or the decision will be made for you. If you do nothing, your money is usually renewed into a CD with the same terms, but at the current rate.
Join the Savers Club
Beyond standard savings accounts that you’ll find at most financial institutions, we also offer the Savers Club: a special account designed to help you meet a savings goal. You’ll set aside a designated amount of money each week for 50 weeks, and then we’ll make your final payment.
Put Your Saving on Autopilot So far, we’ve covered savings accounts you can open with the assistance of a banker and/or an online application process. But if you’re interested in a way to start saving money immediately and automatically using your existing Hills Bank account, we have just the thing for you.
Goals – a feature in Hills Bank Online – lets you create saving goals and start setting aside money automatically. You simply enter a desired amount and end date, and Goals will calculate regular transfers to meet your target. You’ll see a visual reminder of your saving every time you log into your account, making that dream vacation, new car, or whatever you’re saving for feel closer than ever.
By choosing to save today, you’re on the road toward financial wellness tomorrow. Here are a few other things you should do to help you reach financial security and achieve your dreams.