Unlock Your Wealth: Discover the Best Types of Savings Accounts!
Some links on this page are affiliate links from partners who compensate us. Terms apply to the offers listed (check our advertiser disclosure for details). Rest assured, our opinions remain entirely our own. For insights on how we evaluate banking products, see our methodology for unbiased reviews.
- Saving accounts are fantastic tools for reaching different financial goals, and there’s no shortage of options.
- If face-to-face banking is your jam, a traditional savings account might be perfect for you.
- Want higher interest rates and lower fees? An online high-yield savings account could be your best bet.
Let’s talk about checking accounts—they’re great for managing your day-to-day expenses, like rent or a night out. However, they aren’t the best choice for securing your future savings. If you’re looking to boost your savings while resisting the temptation to spend, it’s time to consider opening a dedicated savings account.
With a variety of accounts available, the ideal savings account for you will hinge on your banking style, your financial objectives, and how quickly you need access to your cash.
Compare Savings Accounts
Overview of Savings Accounts
Why Should You Open a Savings Account?
If you’re unclear about what a savings account is, let’s break it down: it’s a type of bank account designed to earn you interest on your money. This makes it a far superior option for growing your funds than a checking account.
Consider this: If you stash your cash in a high-yield savings account earning an average of 4.50% APY (though this rate may vary), that $10,000 can grow to approximately $12,462 in just five years—without adding another dime!
Types of Savings Accounts: Choosing the Best Option
There isn’t a one-size-fits-all answer to which savings account is the best; it heavily depends on your financial needs. Here’s a rundown:
- Traditional Savings Account: Ideal for those who prefer in-person banking.
- High-Yield Savings Account: Perfect for digital banking enthusiasts seeking better rates.
- Money Market Account: Best for those who wish to have checks or debit cards tied to their savings.
- CD (Certificate of Deposit): Great if you can let your money sit for a while.
- Cash Management Account: Perfect for consolidating checking and savings in one place, especially if you’re also investing with the same company.
- Specialty Savings Account: Tailored for specific goals, such as retirement or college savings.
Most of these accounts (except traditional savings and cash management accounts) are available online and at brick-and-mortar banks. Online accounts often boast lower fees, while brick-and-mortar options provide the comfort of face-to-face service.
Let’s dive deeper into the pros and cons of each account type!
Traditional Savings Accounts
Examples: Explore accounts like Wells Fargo Way2Save® Savings, TD Signature Savings, and Regions LifeGreen® Savings Account.
Traditional savings accounts can be opened at your local bank or credit union. Typically, these accounts offer low interest rates (sometimes as low as 0.01% APY) and may impose monthly maintenance fees, though you may be able to avoid them. The upside? You can consult with a banker face-to-face whenever you need assistance.
High-Yield Savings Accounts
Examples include Capital One 360 Performance Savings, Discover® Online Savings, and Chime Savings Account.
Most high-yield savings accounts are online-based, although some traditional banks offer them too. These accounts provide a safe place for your money, especially if they are FDIC insured. Because online banks save on physical overhead, they can afford to offer you better rates and fewer fees. In fact, many top-rated online banks don’t charge monthly fees at all!
Starting is easy too—many high-yield accounts don’t require a hefty initial deposit.
Money Market Accounts
Examples: Check out Axos High Yield Money Market Account, CIT Bank Money Market Account, and Sallie Mae Money Market Account.
Money market accounts function similarly to savings accounts and can be found at both online and traditional banks. They often feature competitive interest rates and might even waive monthly fees. The key difference? Money market accounts typically provide a debit card or checks, making it easier to access your savings when needed—ideal for your emergency fund!
However, they usually require higher minimum deposits, ranging from a few hundred to a few thousand dollars, although some banks don’t require any initial deposit.
Certificates of Deposit (CDs)
Examples: Look into Marcus High-Yield CD, Synchrony Bank CD, and Discover® CD.
A certificate of deposit, or CD, is a solid choice if you don’t need immediate access to your funds. Simply choose a term (typically between three months to five years), deposit your money, and let it grow until maturity.
While savings and money market accounts may offer variable interest rates, CDs promise fixed rates, meaning your interest isn’t going anywhere until the term ends. For example, a $5,000 CD at 5% APY locks in your earnings for the entire year.
You can open CDs at both traditional and online banks, with online options often featuring better rates—without monthly service fees!
Cash Management Accounts
Examples: Wealthfront Cash Account, Robinhood Cash Management Account, and Betterment Cash Reserve Account.
A cash management account merges the best aspects of checking and savings accounts, typically offered by online platforms. Many of these accounts boast competitive interest rates akin to those of online banks.
These accounts may offer uniform rates on your entire balance or allow you to set distinct savings goals with separate interest rates. Although platforms like Wealthfront and Robinhood aren’t banks per se, they partner with real banks to keep your funds safe through FDIC insurance.
Specialty Savings Accounts
Examples: Health savings accounts (HSAs), custodial accounts, IRAs, student savings accounts, senior savings accounts, kids’ savings accounts.
While the accounts mentioned above are fantastic for emergencies or general savings, specialty savings accounts cater to specific needs—be it retirement, health-related expenses, or your child’s future. For instance, HSAs allow you to set aside money for medical costs while potentially growing your funds through investments.
A kids’ savings account provides a way for parents to teach their children about saving while managing their funds until they reach adulthood. Before diving into any specialty account, make sure to familiarize yourself with eligibility requirements and any withdrawal restrictions that may apply.
Frequently Asked Questions about Types of Savings Accounts
Absolutely! Your money is secure in an online savings account as long as the institution is federally insured. Look for a “Member FDIC” logo on the bank’s website, or a statement saying “Federally insured by the NCUA” for credit unions.
Generally speaking, you won’t lose money in a money market account, since they are federally insured up to $250,000 per depositor. However, if you exceed that amount, access to all funds may be restricted in the event of a bank failure.
If you withdraw money from a CD before its term ends, expect to pay a penalty, which usually means losing some of the interest earned.
To determine the right savings account for you, consider your savings goals and how frequently you’ll need access to your funds. Compare specific features like fees, interest rates, and minimum deposit requirements to narrow down your options.
Yes, you can open multiple types of savings accounts if they suit your financial needs. For instance, you might open both a high-yield savings account and a CD to save for different objectives or take advantage of varying interest rates.
If you don’t have at least three to six months’ worth of expenses saved for emergencies, focus on building that fund before investing. If you’ve already established an emergency fund, generally, keep short-term savings (under five years) in a savings account. For longer-term needs, consider investing.
For the highest interest rates, opt for a longer-term CD—typically five years or more. But if you can’t lock your money away for that long, shorter-term CDs are still good options. Otherwise, consider a high-yield savings or money market account for quicker access. Specialty accounts, like Roth IRAs or health savings accounts, can also offer valuable long-term growth benefits.
