There are many things associated with the question what is a savings account, that one would literally get perplexed if they are a newbie. Before investing your money in savings account, you will have to know about certain basic things which can help you. This article completely concentrates on savings account for children and savings bonds.
Savings accounts for children
The price of everything today is growing and it is getting difficult for a common man to make ends meet. It is really important to save now for your children so that it can help them a lot in future. It is every parent’s responsibility to save for their kid’s future. The money which is saved now for your children can later be used on their expenses and education. There are many banks who are readily offering the customers to open a saving account for their kids. Look for the ones that have best saving rate. Only if there is high saving rate, you can yield high on your savings account. It is highly recommended to open the accounts in banks as they are completely safe. Saving the money in banks is completely secured and there is guaranteed return as well. You can earn with the interest rate offered by the bank. This is one of the ideal reasons why parents open a savings account for their kids. It will help the money to grow with the help of interest rates.
There are some parents who feel that keeping the money in house is rather safe than keeping it in banks. But this is completely riskier because there are chances of your home getting robbed and there may not be anything left. All you can do is sit and regret for the money you have lost. If the money is deposited in bank, then it will be insured and in mean time it will increase as well. It completely depends on you as to how you want to save your money for your kids. Your responsibility doesn’t end by opening and depositing cash in the savings accounts for kids. You will have to teach your kids as to how to deposit the money you earn in the bank’s savings account. You will have to teach the importance of saving money to your kids and how can it be used during emergencies.
Savings bonds rates
The savings bonds are a kind of security which can earn interest for about 30 years. They are payable only to the associated person who is registered. It cannot be resold but you can cash them out after 1 year and if you redeem before 5 years, then you will have to pay a 3 months interest penalty. The saving bond rates can be of 2 types:
- Fixed
- Variable
The fixed is the one whose interest value doesn’t change until the time period ends. The interest rate that is fixed in the beginning will remain till the end. The variables are the ones whose interests change with respect to time. It can either increase or decrease based on the current market conditions. The savings bond issued by government can be of 2 different types:
- I bonds
- Series EE patriot bonds
I-bond is referred as the inflation indexed bond. The interest rates are fixed for the entire term. Each month the I-bond’s value increases, the interest will be compounded semi-annually. These bonds are generally used for paying the college fees as there are 100% free from the federal taxes. The series EE patriot bonds are generally referred as “war bonds” and have the interest rates as variable type.