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6 Types of Savings Accounts: Which Is Best for You?


A savings account can be a good place to earn interest on your money while keeping it in an easy-to-access account. However, not every savings account is the same. Let’s compare different features from the most common types of savings accounts. A financial advisor could help you create a financial plan for your savings needs and goals.

Types of Savings Accounts

Savings accounts come with different features, including some that earn more interest than others. Here are six savings account options:

1. Traditional savings account. Traditional savings accounts are those you can open with a bank or credit union in your local area. They offer a convenient way to save since you can open them wherever you do your banking. That makes it easy to transfer money between accounts and get help with any issues that may arise. Plus, these accounts are FDIC-insured, so they’re a safe place to keep your money.

However, traditional savings accounts also tend to offer low annual percentage yield (APY). The average interest rate for savings accounts is 0.08%, but big banks may offer even less. You can generally make up to six withdrawals per billing cycle with these accounts.

2. High-yield savings account. If you aren’t satisfied with the APY your neighborhood bank offers, you might consider a high-yield savings account (HYSA). These are usually online savings accounts, and they offer APYs that are several times the average. There are dozens of HYSAs available today, including accounts from names like Marcus, Capital One, Bask Bank, CIT Bank and Discover.

In many ways, these accounts are like traditional savings accounts. They have the same withdrawal restrictions and are FDIC-insured. The biggest difference is the higher yield and the fact that there are usually no brick-and-mortar locations you can visit if you want personal, face-to-face assistance.

3. Certificates of deposit. A certificate of deposit (CD) is another type of savings account that allows you to earn a higher yield than traditional savings accounts. The catch is you must keep your money deposited for a set term – usually around six months to five years, although some institutions may offer shorter terms.

With CDs, the longer the term, the higher the APY. If you must withdraw your money before the end of the term, there will be a penalty. While this is a downside of CDs, it could be a good option for building long-term savings since you will be less tempted to withdraw the money and spend it.

4. Cash reserve account. Cash reserve or cash management accounts are usually offered alongside brokerage accounts and other types of investment accounts. Money in these accounts is deposited with a partner bank and is FDIC-insured.

Usually, the money in cash reserve accounts is uninvested cash. For example, if you transfer money from your bank to your brokerage, it will end up in a cash reserve account, ready to be invested. But that money also earns interest, typically more than a traditional savings account. Thus, you can also use it as a savings vehicle.

5. Money market account. A money market account is another type of savings account that traditional banks and credit unions offer. Restrictions are similar to those on other types of savings accounts, including a limit of six withdrawals per month. Like other types of savings accounts, money in these accounts is FDIC-insured.

Some money market accounts may have unique considerations, such as higher rates for larger balances or for more debit card transactions per month. In general, though, you can expect higher APYs with money market accounts than with traditional savings accounts.

6. Student savings account. Student savings accounts are one option that is sometimes available to those who are in school. Banks don’t always offer them, but if you can find one, it might have lower balance requirements and benefits geared toward students.

Again, these accounts can be hard to find, but the benefits might be worthwhile if you are currently attending school. If you aren’t sure where to look, start with our list of student savings accounts.

Bottom Line

SmartAsset: 6 Types of Savings Accounts

Setting money aside in an account separate from your checking account is an effective way to build an emergency or save for short-term goals. But traditional savings accounts are far from your only option. High-yield savings accounts, CDs and cash reserve accounts are just a few of the alternative ways to set money aside. If you aren’t satisfied with the APY your bank offers, don’t be afraid to look elsewhere.

Tips for Saving Money

  • It can be hard to know whether you’re on track with your savings. After all, there is a lot to think about. A financial advisor can guide you through major financial decisions, like deciding how much to save. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Saving money is an important part of working toward your savings goals. See if you’re on track to meet your savings goal with our savings calculator. It allows you to add your APY, so you can see the difference that savings accounts with higher APYs make.

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