Types of Savings Accounts

Before diving into savings deposit, let's briefly review the different available types of savings accounts. When you decide to save money and open a savings account, you have several options:

• Regular Savings Account💸 This account has few or no conditions 
attached to depositing or withdrawing money. The interest rate is 
variable and usually on the lower side.
• Savings Accounts with Conditions 💵 This account comes with conditions for depositing and withdrawing money. For example, you may not be able to make monthly deposits or withdrawals.  Sometimes a minimum deposit is required. The exact terms vary per bank. The interest rate is often variable and may depend on how  long and how much money is in the account.
• Fixed-Term Savings Account (savings deposit) 💰 Fixed-term savings accounts have the most restrictive conditions. In exchange for these restrictions, you receive the highest interest rate.

‍

What Is a Savings Deposit?

When you’re certain that you want to set aside money for a longer period, and don’t need it for specific expenses, a savings deposit can be an interesting option. You lock a certain amount of money for a period agreed upon with the bank.

The interest rate is higher than that of regular savings accounts (and since the money is locked in, you can’t use it for impulsive purchases 😉). Often, you need to deposit a minimum amount to open a fixed-term savings account. The minimum deposit varies per bank but typically ranges between 250 and 2,500 euros.

‍

Term of a savings deposit ⏱️

There are fixed-term savings accounts for both long term (1 to 20 years) and short term (a few months). You can decide how much money to lock in and for how long. Think carefully about the duration of your savings deposit and the amount to be locked in. Remember, during this period, you generally cannot withdraw the money. In addition, at many banks, it’s also not possible to make additional deposits.

‍

Early Withdrawal ❌

There are some exceptions to the ‘no withdrawal’ rule. It’s important to check in advance which exceptions apply to you. Examples include:

• If you become incapacitated;
• If you enter debt restructuring;
• If the account holder passes away.

Without a valid reason for early withdrawal, you will usually have to pay a fine. The amount of this fine varies by bank.

Comparing Savings Deposits: Don’t Focus Solely on High Interest Rates 🤓

When comparing fixed-term savings accounts, it’s wise to not be blinded by the highest interest rate. Also, look closely at the minimum deposit amount and the duration of the deposit. A higher interest rate often means your money is locked in for a longer period or that the minimum amount is higher. Think carefully about how much money you can afford to lock away and for how long.

It’s never wise to lock all your savings into a fixed-term savings account. Keep a portion in a regular savings account so that you always have money available for unforeseen circumstances.

‍

Interest Payments 🎉

Ultimately, you choose a savings deposit to earn extra money. You can often choose how the interest is paid out.

1. Immediate Payment

The interest is deposited into your checking account, allowing you to spend it immediately.

2. Compound Interest Contract

The interest is added to your fixed-term savings account, increasing your deposit and allowing you to earn more interest the following year.

‍

Saving with Grassfeld

Do you want to keep track of your finances and your various (savings) accounts? Grassfeld helps you achieve your savings goals and ensures you know exactly where your money is going by automatically categorizing your expenses. You can also set budgets in the app. That helps you don’t spend more money than you want. Download the free Grassfeld app now from your app store.