Timeline: Short Term
Years to save: One year or less
Best ways to save: If you have a limited time frame to work with, two good savings options to consider include:
- A traditional savings account: When you are close to your goal of buying a home, keeping your assets safe and accessible is the most important factor. Though savings accounts may have lower interest rates compared to some other alternatives, they provide you with easy access to cash and are insured by the FDIC up to the applicable limits, making them a safe place to store your down payment.
- A money market account: Money market accounts often offer benefits traditional savings accounts do not. With a money market account, you often have check-writing privileges and access to an ATM card. One feature they share with savings accounts is the ability to send and receive funds to other financial accounts. Additionally, like savings accounts, money market accounts are FDIC insured up to the applicable limits so you can rest easy knowing your savings are protected.
Keep in mind: Both these types of accounts often have minimum deposits and balances and could incur account service fees.
Timeline: Medium Term
Years to save: One to two years
Best ways to save: With more than a year to buy your house, you might want to consider the following savings option for your money:
- Certificates of Deposit: Certificates of Deposit (or CDs), may be a great way to use your idle assets for financial goals you’re looking to achieve within a year or two. Among bank deposits, CDs typically offer higher-than-average rates fixed for the term of the CD of your choice. Before considering a CD, make sure you won’t need to access the assets prior to the end of the term since there are usually penalties for taking the money out sooner.
Keep in mind: There are often minimum amounts to open these accounts, especially for higher-yield options.
