Types of savings accounts: which is better for you?
Are you looking to save money but don't know where to start? Read this guide to understand all your options when it comes to savings accounts, including their benefits and features.
by Aline Barbosa
When it comes to saving accounts, there’s no such thing as “one size fits all”!
Getting a savings account can help you save and grow money over time in a safe and secure way. However, there are many different types of savings accounts to choose from.
They all have their pros and cons, and in this article, we’ll look over them all. Setting up a savings account is relatively easy.
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There’s usually a low deposit requirement and most of them don’t have many fees. The amount of interest you’ll earn on your balance depends on the type of account you have open.
So keep reading the content below if you want to learn more about the different types of savings accounts. That way, you can choose the one that best fits your financial interests.
How many types of savings accounts are there?
There are many different types of savings accounts, and each one has its own benefits. Knowing which type of account is best for you can help you save money and reach your financial goals.
See below to learn more about the various types of savings accounts.
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Online savings accounts are good for easy management
Online savings accounts are a type of account that allows you to save money and earn interest on your deposits.
These accounts are offered by banks and credit unions, and they typically have higher interest rates than traditional savings accounts.
They also offer a number of other benefits, such as 24/7 access to your balance and transactions. Plus online bill pay, and mobile check deposit.
Additionally, online savings accounts are FDIC-insured, so your money is safe in the event of a bank failure.
The downsides of an online savings account is that there are no physical branches. They may also require a minimum balance, and limit the amount of free withdrawals you can make in a month.
High-yield savings accounts are best for growing your money
A high-yield savings account usually provides the consumer with higher interest than a common savings account.
High-yield savings accounts are best for people who want to earn more interest on their money but still have easy access to their cash.
Many online banks offer high-yield savings accounts with no minimum balance requirements and no monthly fees.
When choosing a high-yield savings account, be sure to compare APYs, account fees, and withdrawal limits.
Also, keep in mind that the highest APY doesn’t always mean the best deal. For example, some high-yield savings accounts have higher balance requirements.
Or require you to make a certain number of transfers each month.
Specialty savings accounts are great for students and teens
There are many different types of savings accounts available to consumers, each with its own set of benefits and drawbacks.
One type of account that has become increasingly popular in recent years is the specialty savings account.
Specialty savings accounts are designed with a specific goal in mind, such as saving for a down payment on a home or funding a child’s education.
This focus can help account holders to stay motivated and on track to reach their goals.
However, specialty accounts typically offer lower interest rates than traditional savings accounts, so they may not be the best option for everyone.
Ultimately, it is important to carefully consider all of your options before choosing a savings account that is right for you.
Certificate of Deposit are best for long-term goals
Certificate of Deposit is one of the different types of savings accounts that offers a higher interest rate in exchange for you agreeing to not touch the money for a set period of time.
They are FDIC insured, so you know your money is safe and guaranteed.
CDs usually range from 3 months to 5 years, with longer terms paying more interest. When the CD term is up, you can withdraw your money penalty-free.
But if you need it before the end of the term, there may be a fee. CDs are ideal for people who have extra cash they won’t need access to for at least a few months or years.
They’re also good if you’re looking to earn more interest than what a savings account offers but don’t want to invest in something riskier like stocks.
Money market accounts are solid for higher returns
Money market accounts are one of the most popular types of savings accounts. They also typically offer higher interest rates.
That is because the money in a money market account is often used to invest in short-term debt, such as government bonds.
As a result, banks and credit unions can offer higher returns on these accounts without taking on too much risk.
Money market accounts are best for people who want to earn a higher return on their savings but who don’t need immediate access to their cash.
There is usually a limit on the number of withdrawals you can make from these accounts each month. However, the limit is typically higher than the limit on a traditional savings account.
As a result, money market accounts are a good option for people who are looking for a place to save for long-term goals, such as retirement.
Automatic savings accounts are ideal to save often
Automatic savings accounts are one of the different types of savings accounts that allows customers to automate their savings.
It means that a fixed amount of money is transferred from the customer’s checking account to their savings account regularly.
They can be a helpful tool for people who struggle to save money, as it takes the guesswork and effort out of the equation. With an automatic savings account, you simply need to set up a transfer once.
It can be a great way to make sure that you are consistently saving money, without having to remember to do it every month.
Automatic savings accounts also tend to offer higher interest rates than traditional savings accounts, which can help you grow your nest egg more quickly.
However, they typically require a higher minimum balance than regular savings accounts, so they may not be right for everyone.
Cash management account are more flexible
With a cash management account, the saver generally gets the perks of a checking and savings account combined.
They typically offer higher interest rates than traditional checking accounts and offer check-writing and debit card privileges.
They also come with additional features such as online bill pay and mobile deposit. Cash management accounts are best for people who want to earn interest on their deposits.
Plus, have the flexibility to write checks or use a debit card for everyday purchases.
Some cash management accounts also offer access to investment products such as mutual funds and ETFs. For people who want to keep their finances in one place, a cash management account can be a good option.
Should you get a cash management account?
Did the cash management account grab your attention amongst all the different types of savings accounts?
Then follow the link below to learn more details about it. Plus, we’ll tell you what you need to do to open one for yourself.
What is a Cash Management Account?
A cash management account can help you streamline your finances. Here's what you need to know about this type of bank account.
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