Safe, secured, insured.

Setting up a bank account these days is a widespread practice. Individuals, public and private organizations, corporations and even governments have some amounts stashed away in some banks. And why not use banks? These are time-tested institutions where your money can be safely kept away. No glass jar or piggy bank can match the bank’s safety and security. Moreover, bank deposits are insured up to $250,000, which means bank depositors will receive a certain insurance amount in case the bank where their money is deposited folds up.
Perhaps one of the best features that any bank has to offer is their earning of interest. However, because banks only offer a low rate of return (with interest rates only up to 4% for some banks), they lack the ’sex appeal’ that other securities such as stocks, bonds and mutual funds have. But don’t underestimate the crucial role banks play in nation-building.

For several centuries now, banks have improved our way of life. Banks have funded major industries, built magnificent corporate skyscrapers and provided funds so families could own decent houses and nice cars.

But just how are banks useful in our quest to improve our personal finance?

Banks generally offer several types of accounts that suit a depositor’s financial requirement. Four of the most common types of bank accounts are Checking and Savings accounts, Money Markets and Time Deposits.

Checking Account

Checking accounts are bank accounts that allow for the funds to be withdrawn through check, cash machines and even electronic debits. Also called demand accounts, checking accounts are one of the most liquid forms of bank accounts. But because of that liquidity, they offer only a small interest rate.

Savings Account

The savings account is arguably the most common form of bank accounts, and is considered to be one of the most liquid outside of checking accounts. However, savings accounts have some limitations as they have a limited number of free transactions. Savings accounts also have maintaining balances. Once funds reach below the stipulated maintaining balance, certain charges will apply.

Time Deposit

Most banks also offer time deposit accounts. Time deposits are somewhat forced savings in that funds held in time deposit accounts cannot be withdrawn before the account’s maturity period (generally at least a month). During the time that the funds are held in time deposits, the funds earn a certain rate of interest.

Money Market Accounts

This type of account is very similar to a savings account, except that the rate of interest is more competitive in exchange for larger-than-normal deposits. This is arguably the most restrictive form of bank account, in that depositors will have to maintain a certain amount of balance to receive a higher rate of interest.

Bank accounts are excellent ’shelters’ for money fresh out of investment securities. For example, fearing that the market could tumble according to all market indicators, a stock trader could cash his stakes and move his money to a time deposit account, where it can be held for at least 30 days while he waits for the market furor to ease. While in the time deposit, his money may not be earning as much as it was while in the market, but at least it is still earning a decent amount of interest