I wish I had $1000 bucks in my hands, why I'd go out and buy a... oh nevermind. Megan, $1000 bucks is a good amount of money to have when it comes to savings. You can do a lot with that.

     It probably isn't the best idea to keep such a big wad of cash in a plain old savings account. That is, unless you plan on spending it next week! Banks specialize in two different ways of keeping your money. Sit back, grab a soda, and let me talk!

Tomorrow, or next year?

Banks do two things for your money:

     A savings account is a good place to keep your money if you just want to keep it safe. It doesn't pay you a lot in interest, but you can get your money out, or withdraw it, pretty much whenever you want. Another type of safe account would be your everyday checking account.

     If you want your money to earn money for you, then you've got to step up to the big guys; a CD (certificate of deposit), high-yield checking account, or some type of investment like stocks or a mutual fund. All of these types of accounts pay you a lot in interest, but your money is a little harder to get out, at least without losing some of the interest you've earned.

The Good Side

     Let's take that $1000 you have. In a normal savings account, you'd earn only about $50 bucks in a year. If you put that money into a 12-month CD, you'd earn about $85 in interest in that same year. And, if you put that cash into stocks or a high-performance mutual fund, you could earn even up to $200 to $300 in a year! (or if you bought Ebay stock when they first started selling it a few months ago, you could have made another $1000, but...)

The Bad Side

     Let's now say that you wanted to buy a solid-gold Harry Potter keychain for $200. Gotta have it. If you had your money in your normal savings or checking account, you could go down to the bank and get $200 out right then. Bam. If you had your cold cash in a CD, then it'd take maybe a day or two, and you could lose some of the interest you've earned because you withdrew money early from it. So now your awesome keychain would really cost you maybe $225! And getting money out of a stock or mutual fund is even harder. It all comes down to what you want with your dough: freedom (called liquidity) or more money (called higher returns).

So, to wrap up this huge answer, talk with your parents about what your goals with the money are and decide what type of bank account would be best for what you want.

Did You Know?

The US has had, counting the current one, 11 recessions since 1945. The average length of a recession is 11 months and none of the 11 recessions has ever exceeded 16 months!