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Which Deposit Account is Right for You

August 18, 2021

With hundreds of account options available in the market today, choosing the right one to fit your individual needs is critical. But where do you begin? The first step for any consumer is to prioritize your insurance, liquidity, and yield requirements:

  • Insurance is the safety of your money.
  • Liquidity is how accessible your funds are.
  • Yield is the return, or interest, you receive on your money.

Understanding what is most important for your overall financial portfolio will shape the account (or account mix) that is right for you.

Insurance – The Safety of Your Money

If safeguarding your deposit assets is a high priority for you, you’ll want to consider federal insurance protection. Member banks regulated by the Federal Deposit Insurance Corporation (FDIC) offer depositors a layer of protection when balances are maintained below the $250,000 threshold in each of the 14 ownership categories. With a customized deposit account portfolio, utilizing multiple ownership categories, individuals can maximize their insurance coverage well beyond the $250,000 limit. If you regularly maintain deposit balances beyond this amount, insurance should be considered a high priority to guarantee protection.

Liquidity – The Accessibility of Your Money

If you plan to more often spend the cash you have on hand, you may want to consider something else entirely. Banks offer a variety of demand products, such as checking, savings, and money markets accounts, where the funds are available for use at all times. These products are great options when you are uncertain of your liquidity needs or if you plan to use the money quickly. If saving is a priority and time is on your side, consider a time deposit account like a certificate of deposit (CD). These account types restrict access to your funds for a period of time that can vary from as little as 6 months to up to 5 years. Money held in these accounts cannot be used until the CD matures without paying an early withdrawal penalty.

Yield – The Return on Your Money

Lastly, consider the potential yield you expect to earn on your deposit accounts. Whether your balance is big or small, there are some accounts that are designed to help your money work for you. Banks traditionally offer higher interest rates on accounts that are designed to save like money market and savings accounts. These will earn more than a standard checking account over time, while longer term CDs historically offer the highest yield on deposit products.

In Conclusion

While many account types present a variety of benefits and concerns, money market accounts often check all the priority boxes. This unique deposit account solution is protected with FDIC insurance and can be structured to utilize multiple ownership categories to maximize coverage. It is a liquid account option that is readily available for use. Money market accounts are also interest bearing and traditionally earn a higher interest rate, as they are often labeled as a savings vehicle. And, as an added bonus, checks are available on these accounts for easy access to funds.

As you reflect on your own personal deposit needs, know that your First Western Trust Private Banking team is here to help. We take the time to understand your individual priorities and help design a tailored deposit portfolio that aligns with your goals. Contact First Western to learn more.

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