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If you’re looking to save for a specific short-term goal, you may want to consider opening a dedicated savings account. Many financial institutions offer these accounts, also known as club savings accounts, for major spending events such as holiday shopping, vacations and even taxes.
You can generally open these accounts at any time of the year and contribute by making regular deposits in person or automatically through your checking account. You might also be able to contribute with automatic payroll deductions.
Limits on withdrawals
In some ways dedicated accounts are helpful tools for saving, but they also have limitations. For example, you generally have a short window of time to withdraw money. In the case of holiday accounts, you may be able to withdraw only toward the end of the year. Other accounts might come with looser restrictions, allowing you to withdraw on any date, but just once annually.
If you have a hard time growing a balance because you keep dipping into it for one reason or another, such restrictions could deter you from withdrawing funds. But they might also make it harder to access your money if you fall into a financial crunch. Because of this, you wouldn’t want a dedicated savings account to replace an emergency fund in an easily accessible savings account.
Getting a dedicated savings account
If you’re interested in opening a dedicated savings account, contact your financial institution for more information. You can typically open an account online, over the phone or at a branch office. Many institutions require a low initial deposit, have low minimum balance requirements, charge low or no monthly fees, and provide free access to online banking for these accounts — but you’ll want to ask your particular financial institution for details.
If you’ve had a hard time meeting short-term savings goals in the past, a dedicated savings account could get you closer to hitting your target.
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