Having a savings account or some form of a savings vehicle is one personal finance practice that has remained tried and true. Even as kids we were encouraged to save money in our piggy banks. Over the years, the popularity of different savings account options have phased in and out, impacted alternately by the current state of the economy, interest rates, and government policy. However, maintaining a savings account for emergencies, a vacation or an unexpected expense has remained an important part of any healthy financial plan that credit unions continue to stress to members. There are a few different options out there, each with pros and cons depending on your member's situation; how liquid they need their funds, if they can supply and maintain a minimum balance, and the time frame they could let their funds grow untouched. A little member education can go a long way when it comes to choosing a savings account that works. And having savings account options is key to ensuring you meet your member's needs.
Member Education: Types of Savings Accounts
The three most widely known savings vehicles are a standard savings account, a money market account and a CD (Certificate of Deposit). Regular savings accounts are by far the most common, easily opened and can be linked right to your member's checking account, facilitating fund transfers and deposits. Some financial institutions require a minimum balance, though that might be waived or satisfied with an attached checking account or other services like direct deposit. They tend to have lower interest rates but in exchange offer the easiest access to funds, and are generally worry-free.
Money Markets are another avenue for saving and are considered a safe place to hold money because they are insured by the government. They often have a minimum balance requirement, but usually offer a higher APR. Certificates of Deposit, or CDs, are another popular option, also federally secured and offer higher interest rates as well. They are considered more of an investment, as money is held on deposit for a period of time, with the certificate maturing anywhere from one month to 5 years. With CDs, however, because money is tied up longer, members benefit from the best APR. This savings option is great if a member is able to set money aside for a little while, as there is typically a penalty for early withdraw.
6 Ways to Grow Your CU's Savings Account Portfolio
For credit unions, here are 6 ways to improve your basic member services through savings account options to ensure you are competitive:
- Interest rates - Savings accounts are notorious for having low interest rates and are not the place to park your money if you are looking for it to grow. These accounts are simply a place to hold your money in the event of an emergency or unexpected expense or just rainy day plans. That being said, credit unions can be more aggressive on rates to attract member's who need fluid options in their account but would profit from a higher rate.
- Opening deposit/minimum account balance - Some credit unions require a minimum deposit made when opening an account. Some members simply are not prepared to make a sizable deposit. Though the account is meant essentially to hold and save money, members can be skeptical of minimum balance requirements and fear that they will be hit by fees. These tactics are often employed at banks and credit unions may benefit from being more lenient here to gain member trust.
- Fees - As mentioned above, some accounts carry penalties or fees if a balance dips low or if you have excessive withdrawals. Ensure you are not imposing excessive fees - with earning so little interest, it would be a shame for a member to actually lose money while trying to save.
- Easy or automated deposits and transfers - One of the easiest ways for a member to accumulate money is to have it automatically deposited into their savings account. Out of sight, out of mind. Make sure your accounts are aware of the ability to receive direct deposits from employers or at least the capability of transferring from a connected account. This will increase the likelihood of actually saving some cash.
- Accessibility - When it comes to a member monitoring savings growth, it's important they are able to easily maintain the account and have access to it at all times. The ability to go to an ATM and retrieve funds after hours or check the balance when an emergency arises is important. Mobile banking apps where enable members to see their current balance and allows them to transfer between accounts.
- Easily make deposits - As mentioned above, automatic deposits make saving so much easier. Additionally, making deposits using RDC - Remote Deposit Capture - is crucial. Grandma's birthday check can be deposited and tucked away for college before the candles on the cake are even blown out.