Savings accounts can be safe places to keep the money you don’t intend to spend right away.
These accounts are useful when planning for short-term needs, such as an emergency fund, and longer-term goals like stashing away cash for a down payment on a home.
There are different types of savings accounts to choose from, and they’re not all alike. The options include traditional savings accounts, high-yield savings accounts, money market accounts, certificates of deposit, cash management accounts and specialty savings accounts.
What are the best types of savings accounts, and which types should you have? It depends on your needs and goals.
Knowing how the various savings account options compare can make it easier to select the right place to keep your money.
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Types of Savings Accounts
Distinguishing between different savings accounts means looking at their features, where you can open them and what they’re designed to do.
As you compare different savings accounts, it can help to ask these kinds of questions:
- Is this account designed for any specific purpose or goal?
- How much interest does this account earn?
- Are there minimum deposit requirements or minimum balance requirements to meet?
- Does the bank charge any fees for this type of savings account?
- Are there any tax benefits or advantages associated with this savings account?
- How accessible is the money in the account?
- Will I pay any penalties for withdrawing money from the account?
Doing this kind of research can help you decide which types of savings accounts to have. From there, you can choose where to open them and how to fund them.
1. Traditional or Regular Savings Account
Good for: People who need to save money for the short or long term and aren’t as concerned about getting the best interest rate, expressed as the annual percentage yield (APY).
Traditional savings accounts are what you may immediately think of when you consider where to save. These are the savings accounts you typically find at traditional banks.
These types of savings accounts generally allow you to earn interest on your money, although they usually pay lower rates than other savings products. Many banks and credit unions allow you to open a regular savings account with a low minimum deposit.
Traditional savings accounts typically allow you to make three to five monthly withdrawals (not including ATM withdrawals or in-person withdrawals at a branch) before incurring a small penalty. Banks may allow you to manage your account online, via mobile banking, by phone or at a branch.
Banks in India work under the supervision of the RBI and your deposits are insured for up to INR 5 lakh per depositor, per account ownership category, in the event of a bank failure.
Know the interest rates of all Savings Bank Accounts in India.
Pros
- It’s usually easy to open a regular savings account at a branch, and some banks allow you to do so online.
- You can earn interest on your savings to grow your money.
- You can visit a branch if you need help or want to deposit cash.
Cons
- The interest rates are usually low compared to other savings options.
- Monthly maintenance fees may cancel out interest earnings.
- Additional fees may apply for excess withdrawals.
2. High-Yield Savings Account
Good for: People who want to earn a more competitive rate on savings while minimizing fees.
High-yield savings accounts—typically found at online banks, neobanks—are savings accounts that offer a higher APY compared to regular savings accounts. This is one of the best types of savings accounts to maximize your money’s growth.
Online banks often offer different types of high yield savings accounts to attract savers who want to earn a better interest rate than what is found at brick-and-mortar banks and credit unions. This type of savings account may be appealing if you’re comfortable managing your account via website or mobile banking versus visiting a branch.
High-yield savings accounts are also RBI insured, just like traditional savings accounts. In addition to offering better rates, online banks tend to charge fewer or lower fees, including monthly maintenance or excess withdrawal fees.
Pros
- You could earn a much higher interest rate compared to traditional savings accounts.
- Online banks typically have lower minimum deposit requirements to open an account.
- You’re less likely to be charged a monthly fee at an online bank.
Cons
- No branch banking access means you can’t deposit cash directly into your account at a branch.
- Transferring money between an online savings account and accounts at another bank can take up to a few days to process.
- You may or may not have access to your money via ATM, depending on the bank.
- These accounts aren’t always covered by FDIC insurance.
3. Specialty Savings Account
Good for: People who want accounts tailored to specific savings goals.
Specialty savings accounts are designed to help you reach specific savings goals, rather than being a catch-all for money you don’t plan to spend. And in some cases, they can be intended for a specific type of person, rather than a savings goal. Many banks in India are popularizing the concept.
For example, there are different types of savings accounts for minors. Three types of savings accounts you might set up on behalf of a child or teen include:
- Kids’ savings accounts
- Custodial savings accounts
- Student savings accounts
You can also set up different types of education savings accounts. Then there are different types of retirement savings accounts you could set up for yourself.
You should be able to find most of these accounts at banks, credit unions, brokerages or investment companies. In the case of a Health Savings Account, you’d only have access to one of those if you have a high deductible health plan.
Opening one or more specialty savings accounts may make sense if you have a singular purpose for saving money. Just keep in mind that there may be restrictions on when and how you can withdraw those funds later.
Pros
- They can help you save money for a variety of specific financial goals.
- Specialty accounts can earn interest to help you grow your money, just like other savings accounts.
- You may pay low or no monthly maintenance fees depending on the account.
Cons
- The interest rates you earn for child savings accounts, student accounts or Christmas Club accounts may be lower than high-yield or even regular savings accounts.
- Specialty accounts may have restrictions on who can open them.
Learn about the Best Savings Accounts in India.
Why Would You Put Money in a Savings Account?
Here are reasons why it can make sense to put money in a savings account:
- You can earn interest. Putting money into a savings account allows you to earn interest on your balance. Some checking accounts pay interest, but many do not. Money left to sit in a non-interest-bearing checking account doesn’t have a chance to grow.
- It can help you save and not spend. Having a savings account may help you avoid spending money that’s earmarked for a specific goal. Keeping all of your money in a checking account, for example, could make it easier to spend money you intend to save.
- It can help with financial emergencies. Even if you don’t have a set savings goal, having a savings account can still make sense. Having money in a savings account can make it easier to pay bills and everyday expenses in case of an emergency—if you lose your job or your car breaks down, for example. This way, you don’t have to turn to a credit card or a high-interest loan. And if you don’t have to use your savings for an emergency, you can keep growing your money without having to worry about racking up debt.
- It can keep your cash safe. Keeping your money in a savings account also offers a measure of protection. If you were to keep cash at home, for instance, it could be stolen. Walking around with a wallet full of cash could also put you at risk of theft or loss.
Featured Partners
1
AU Bank Savings A/C
Interest rate:
Upto 7.25%
Balance required:
INR 2,000 onwards
Special feature:
Monthly interest payouts
On AU Bank's secure website
2
Yes Bank Savings Account
Interest rate:
Upto 6.25%
Balance required:
Zero
Special feature:
Earn up to 16000 Yes Bank Rewardz Points worth 4000 INR
On Yes bank's secure websie
3
Kotak 811 Zero Balance Savings Account
Interest rate:
Upto 7% p.a. with ActivMoney
Balance required:
Zero
Special feature:
Zero-contact, Video KYC Savings Account
On Kotak's secure website
Bottom Line
When choosing a savings account, it’s important to remember that you don’t have to pick just one. Depending on what you want to achieve financially, you may decide to open multiple savings accounts, CD accounts, money market accounts or specialty accounts. To find the best account for your needs, consider your financial goals.
Frequently Asked Questions (FAQs)
Which savings account is best?
The best savings accounts pay high interest rates, charge few fees and provide the accessibility you need. A savings account with an excellent APY at an online bank or credit union may be the best option for you if you don’t mind forgoing branch banking. Or you may prefer a savings account at your local bank if you prefer in-person banking.
What types of savings accounts should I have?
The type of savings account should reflect your financial needs and goals. You may have one high-yield savings account to hold your emergency fund and a money market account to hold money for short-term goals, such as buying a car.
Is a savings account an asset?
An asset is something that has a positive value, and a savings account falls under this umbrella, assuming it has a positive balance. Savings accounts are generally considered to be liquid assets since it’s relatively easy to convert them to cash. For instance, if you needed money to cover an emergency expense or pay a bill you could withdraw cash from savings or transfer funds from your savings account to a checking account online with just a few clicks of a button.
