When you save, you must have somewhere to put that savings.  Unless that money is set aside, it’s not really savings.  But where should you put that money?  

When deciding where to save, select an option that works best for you.  Consider the benefits as well as the risks in making your choice. Being able to weigh the benefits and risks of any financial decision is a foundation of financial health.

Saving in a Piggy Bank, Under Your Mattress, or in the Cookie Jar

Everyone has saved or has a friend or family member that saves in his or her own home.  It could be change in a jar or in an actual piggy bank.  It could be money under the mattress or in a sock drawer.  What are the benefits and risks to saving in your home?

Benefits

Risks

  • Money can be lost
  • Money can be stolen
  • Money can be destroyed in a fire
  • Money can be lost or destroyed natural disaster
  • Easy to access—you can “dip into your savings”

Saving in an Account at a Bank or Credit Union

  • Saving in a bank or credit union is an alternative to saving in your home.  But, for some people, there may be barriers to opening a savings or checking account.  What are the benefit and risks to saving in an account at a bank or credit union?

Benefits

  • Money deposited into an account at an FDIC-insured bank or NCUA-insured credit union is insured up to $250,000 per account.  This means even if the money is lost, stolen, destroyed in a fire or natural disaster, or lost due to a bank failure, you will still get your money.
  • Having accounts at a bank or credit union lets you automate savings through direct deposit of your paycheck with automatic transfers to a savings account.
  • You can earn interest on your deposits.

Risks

  • You may not be approved for an account at a bank or credit union because of a negative banking history report or negative information on your credit report.
  • You may not have a bank or credit union that is conveniently located to where you live or work.
  • You may have to keep a minimum balance or else you get charged fees.
  • The rate at which you can currently earn interest is very low.

Saving on a Prepaid Debit Card

While a newer option than saving in your home or in an account, saving on a prepaid debit card may offer some of the protections of an account without the barriers. The saving portion of a prepaid debit card is called a purse feature or set aside account.  It generally involves transferring funds from your prepaid debit card. What are the benefit and risks to saving using a prepaid debit card?

Benefits

  • No banking history or credit report checks
  • Some cards allow you to direct deposit your paycheck.  This means you can automate savings
  • Some insurance protection available on some cards—based on your funds being placed into a custodial account at an FDIC-insured financial institution

Risks

  • There may be fees for loading funds, accessing funds, and transferring money to a savings set aside account.  Be sure to review the fee information provided when you open an account. It may pay to comparison shop.
  • Your money is not protected from failure of the debit card issuer.  Make sure you are using a reputable provider.

You can also save in a U.S. savings bond or certificate of deposit if you have a lump sum to deposit.

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