Starting this month, I resolve to save 5% of my income every month, always, no matter what. If I can consistently pay the IRS, the cell phone company, the electric company, the health insurance provider, etc., there’s no reason I can’t do the same for myself. I do have an automatic savings draft set up, but it’s just $50 a month and I now feel a strong push to do more than that.

Ten percent is where I really want to be, but I’m not quite ready to make. I have a plan to get there though.

When you’re saving money, even if it’s just an emergency fund or Christmas fund, where you put the money is important. Put your money savings in a place that will earn the most interest with the least amount of risk. This is regular savings I’m talking about, not investment money or retirement funds.

First, no matter which account you pick, make sure it’s at a bank that’s FDIC-insured or a credit union that’s NCUA-insured. The government guarantees deposits up to $250,000 at insured banks. Most savings accounts, checking accounts, CDs, and money market accounts are insured. However, trust funds, money market funds, stocks, bonds, and other investments generally aren’t insured.

Four Bank Account Options

Checking Accounts

I don’t recommend saving money in a checking account for several reasons. It’s too easy to access the money. It’s hard to keep track of your money if your savings and spending money are co-mingled. Checking accounts typically pay only a paltry amount of interest on your balance. Accounts with interest rates typically have a monthly fee or minimum balance requirement that you may not be able to meet.

Savings Account

Savings accounts are a place to put your money, if you choose the right one. Many savings accounts are free, but those at traditional banks have very low interest rates, you’ll only earn pennies on your money. Savings accounts only let you make six withdrawals per month or statement period before you’re charged a penalty.

There are a few online savings accounts with good interest rates – good compared to offline savings accounts. Ally Bank, HSBC Direct, and ING Direct have some of the most competitive rates on savings accounts.

Money Market Account

Money market accounts are similar to savings accounts, but they allow let you access your money with a check or debit card. You still are limited to six withdrawals per month or statement period. Also, like savings accounts, traditional money market accounts pay a small amount of interest . Plus, there’s usually a monthly fee or minimum balance requirement. Some online banks have better rates.

Certificate of Deposit

A certificate of deposit is a type of low-risk investment that pays interest on your balance provided you leave the money alone for a specific period of time that you choose, usually between 3 months and 5 years.. Generally, the longer the term, the more interest you earn. For example, at Ally Bank a 3-month CD has a .64% APY (annual percentage yield) while a 5-year CD has a 2.40% APY. Clearly, the 5-year CD pays more interest, but if you need to access your money before the 5-year time period is up, you’ll have to pay an early withdrawal penalty of 60 days interest. Ally Bank’s early withdrawal penalty is generous. Many banks charge 12 to 18 months of interest.

Best Place for Your Money

Now that I’ve given you the rundown of your options, I’d say the best places to save money are online savings accounts and CDs offered by online banks. They have the best interest rates. In a freelancer’s world of electronic payments, it’s easy to open and fund an online account. For a few months, all my savings will go into a high-yield savings account. Once I’ve accumulated a couple to a few thousand dollars, I’ll put the money somewhere that pays more interest or that will give me a tax deduction.

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