Types of Savings Accounts: Choosing the Best Option for Your Financial Goals (2024)

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• Savings accounts are great tools for working toward various goals, and there are many types.
• You may prefer a traditional savings account if you want to bank in person.
• For better interest rates and lower fees, you might like an online high-yield savings account.

A checking account is a good place to store money you need for rent, daily necessities, or a night out with friends. But it isn't ideal for saving for the future. To remove the temptation and watch your money grow, you'll want to open a savings account.

There are several types of accounts to choose from, and the best savings account for you will depend on your banking preferences, goals, and how soon you'll need to access your money.

Compare savings accounts

Overview of savings accounts

Why should you open a savings account?

If you're not sure what a savings account is, it's a type of bank account that allows you to earn interest on your money. A savings account is a better tool than a checking account for growing your savings.

For example, you can put money in a high-yield saving account that pays an average of 4.50% APY (it may fluctuate over time) and compounds interest daily. That $10,000 turns into about $12,462 over five years. And that's assuming you don't contribute any more money to your savings.

Types of savings accounts: Choosing the best option

There's no clear "best" type of savings account. It depends on what you want to get out of the account. Here are your options:

• Traditional savings account: Best if you want to bank in person
• High-yield savings account: Best if you want to bank digitally
• Money market account: Best if you want a debit card or paper checks tied to your savings
• CD: Best if you're comfortable not touching your money for a long time
• Cash management account: Best if you want to keep your checking and savings in one account, and/or bank with the same company you use for investing
• Specialty savings account: Best if you have a specific savings goal, including preparing for retirement, covering health expenses, or saving for a child, college student, or senior

The majority of these accounts (with the exception of traditional savings accounts and cash management accounts) are available both online and through brick-and-mortar banks. The advantage of online savings accounts is that they often do not have as many fees. Brick-and-mortar banks have access to in-person banking, though.

Below, we'll go more in-depth and explain the pros and cons of each account.

Traditional savings accounts

Examples: Wells Fargo Way2Save Savings, TD Bank, Citi® Savings Access, Regions LifeGreen® Savings Account

You can open a regular savings account with a brick-and-mortar bank or credit union.

These accounts pay low interest rates, sometimes as little as 0.01% APY. Most charge monthly maintenance fees, but you may qualify to have them waived. You have the benefit of being able to speak to a banker face-to-face when you have a question.

High-yield savings accounts

Examples: Capital One 360 Performance Savings, Discover® Online Savings Account, Chime Savings Account.

Most high-yield savings accounts are generally online savings accounts. Although some brick-and-mortar financial institutions also have high-yield savings accounts too.

High-yield savings accounts are safe as long as they have FDIC insurance to protect your money should something go wrong and the bank shut down.

Keep in mind online banks don't have to pay for the expenses that come with a physical building, they can afford to pay you higher rates and charge lower fees. Most of the best online banks don't charge monthly service fees at all.

You also don't need much money to get started. Many of the best high-yield savings accounts do not require an initial opening deposit.

Money market accounts

Examples: Axos Bank, CIT Bank, Sallie Mae, CFG Bank High Yield Money Market Account

Money market accounts are similar to savings accounts. You can find them at either brick-and-mortar banks or online institutions. The best money market accounts are available online, though. These money market account interest rates tend to be more competitive. You can also find accounts without monthly bank maintenance fees.

The main difference between a money market account and savings account is that the former usually comes with a debit card or paper checks. This makes it easier to access your savings in a pinch, making money market accounts worthwhile options for storing your emergency fund.

Money market accounts typically have higher minimum deposits than savings accounts, maybe a few hundred or a few thousand dollars. You can find some banks that don't require any opening deposit, though.

Certificates of deposits

Examples: Marcus High-Yield CD, Synchrony Bank CD, Discover CD, Crescent Bank CD

A certificate of deposit, or CD, can be a good savings tool if you don't need quick access to your money.

Choose a CD term — probably between three months and five years — and keep your money in the account until the term ends.

Savings and money market accounts pay variable interest rates, meaning your rate can change after you've opened the account. But CDs pay fixed rates, so your rate is locked in once you've deposited the cash. For example, if you open a $5,000 CD with a 1-year term at 5% APY, you'll earn 5% for the entire 12 months.

You can open CDs at both brick-and-mortar and online institutions, but online banks pay better rates. Regardless of which type of bank you choose, you shouldn't have to pay monthly service fees.

Cash management accounts

Examples: Wealthfront Cash Account, Robinhood Cash Management, Aspiration Spend & Save Account, Betterment Cash Reserve Account

A cash management account is a hybrid checking/savings account that is generally offered by an online banking platform. Some cash management accounts pay high interest rates that are competitive with the rates offered by online banks.

Some cash management accounts pay the same rate on your entire balance, while others let you set up separate savings goals and pay interest just on your savings balances.

Online banking platforms such as Wealthfront and Robinhood aren't technically banks. Most of them actually specialize in investing, but they provide cash management accounts so you can keep your spending, saving, and investing money all in the same place. These platforms are partnered with real banks, so your money is safe through FDIC insurance.

Specialty savings accounts

Examples: Health savings accounts, custodial accounts, IRAs, student savings accounts, senior savings accounts, kids savings account

The types of savings accounts we've already mentioned can be great places to store emergency funds or save for goals like a down payment on a house. But if you want to save for retirement, your health, or your child's future, you may want a specialty savings account.

For example, a health savings account is an account specifically for health-related costs, and you can invest funds to earn even more money to pay for medical expenses in retirement.

A kid's savings account is a type of bank account for minors to open with parents or legal guardians. Parents will be able to manage their kid's savings account until their child reaches the age of 18 and can use the account as a tool for teaching their child how to save.

Before opening a specialty account, research whether you're eligible and if there are any restrictions regarding when you can take money out of your savings account.

Frequently asked questions about types of savings account