Savings and checking and CDs, oh my! Basic banking for your military needs.
A penny saved is military smart...if your bank accounts are working as hard as they can to bolster your military lifestyle goals. You have to do your part as well: if you're not saving at least 10% of your military salary, you aren't saving enough. And you have to choose from a smorgasbord of bank products, some that will support your military financial goals and money habits better than others.
Let's start with savings accounts. As a rule, ten percent of your annual military salary should be saved for your military retirement - but the older you are when you start saving, the more you'll need to save. If you start your savings account at age 50, you may need to save 30% of your military salary per year, or more. You can see why the best bank could be the one that pays the highest interest on your savings accounts. It should also facilitate direct deposit of your allocated savings amount, making saving part of each military paycheck an automatic habit.
Here's a nice military perk that should be of high interest: the military Savings Deposit Program allows active military in a combat zone to contribute up to $10,000 at a guaranteed 10 percent annual interest rate. Wow!
When it comes to straight savings, banks typically offer two kinds of savings accounts: Passbook and Statement Savings Accounts. Savings Accounts generally pay lower interest rates than money market accounts or CDs. Passbook Savings offer a low interest rate and may charge minimum balance fees. With Statement Savings, instead of a booklet, your bank mails you a statement documenting all of your transactions, on a monthly or quarterly basis. Statement Savings accounts also charge minimum balance fees.
Allow your money more time to grow - the gains on your invested savings will build on the prior year's gains. That's the power of compounding, and it's the best way to accumulate wealth towards your military retirement.
Basic checking accounts are pretty basic - limited services for a small price. You might prefer o an interest-bearing checking account that pays interest and offers unlimited check writing privileges as long as you comply with requirements. Asset Management Accounts are yet another checking account option, offered by brokerages and banks, with the convenience of one account to take care of all your banking and investment needs including check-writing and a comprehensive end-of-year statement that documents all of your transactions
CDs offer a higher interest rate with terms from 30 days to 5 years. The interest rate and annual percentage yield will not change for the term of the account. CDs offer you:
- Rates - Interest rates vary according to the term
- Flexible options - receive a check by mail, automatic deposit into your checking or savings account or add it to the principal balance of your CD
- Fees - penalty may be imposed for early withdrawals
- Free Online Banking to view your CD account
A last word for military money management: keep three months worth of living expenses for your military family in your easily-accessible bank savings account or a high-yield money-market account. If you have kids or rely on one income, make it six months.
