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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.
| Best for ... | People who like banking in person |
| Interest rates | Low |
| Pros | Access to a physical branch |
| Cons | Low interest rates, high monthly fees |
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.
| Best for ... | People who are comfortable banking digitally |
| Interest rates | High |
| Pros | High interest rates, low fees, low opening deposits |
| Cons | No physical branches |
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.
Insider's Featured Savings Accounts
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Western Alliance Bank High-Yield Savings Premier
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FVCbank High Yield Savings Account
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EverBank Performance℠ Savings
Annual Percentage Yield
5.36%
5.36% annual percentage yield (APY) is accurate as of 01/17/2024 and subject to change at the Bank’s discretion. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
Show more
Annual Percentage Yield
5.26%
Minimum Deposit
$1
Annual Percentage Yield
5.15%
Minimum Deposit
$0
On Featured Savings Offer - Position 1's website
On Featured Savings Offer - Position 2's website
On Featured Savings Offer - Position 3's website
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.
| Best for ... | People who want easy access to their savings |
| Interest rates | Usually high |
| Pros | High interest rates, debit cards or paper checks |
| Cons | Higher opening deposits |
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.
| Best for ... | People who can tuck away money for a long time |
| Interest rates | Usually high |
| Pros | Higher rates with longer terms, fixed rates, no monthly fees |
| Cons | Lower rates with shorter terms, higher opening deposits, penalties for withdrawing money early |
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.
Insider's Featured CDs
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Featured Offer - Barclays 1 Year Online CD
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Featured Offer - Western Alliance Bank 3 Month CD
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Featured Offer - Barclays 6 Month Online CD
Annual Percentage Yield
5.00%
Minimum Deposit
$0
Annual Percentage Yield
5.26%
Minimum Deposit
$1
Annual Percentage Yield
5.00%
Minimum Deposit
$0
On Featured CD Offer - Position 1's website
On Featured CD Offer - Position 2's website
On Featured CD Offer - Position 3's website
Cash management accounts
Examples: Wealthfront Cash Account, Robinhood Cash Management, , 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.
| Best for ... | People who want to bank and invest with the same company |
| Interest rates | Moderate |
| Pros | Above-average rates, low fees, no withdrawal limits |
| Cons | Lower rates than HYS accounts, no physical branches |
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.
| Best for ... | People with specific or unique savings goals |
| Interest rates | Varies by account type |
| Pros | Save for a specific goal |
| Cons | Only for certain types of people, some restrictions on withdrawals |
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
What are the main differences between traditional and high-yield savings accounts?
The main difference between a traditional and high-yield savings account is the interest rate. High-yield savings accounts pay significantly more interest than traditional banks.
Is my money safe in an online savings account?
Yes, money is safe in an online savings account as long as the financial institution is federally insured. If it's a bank, there should be a "Member FDIC" logo at the bottom of the bank's website. If it's a credit union, there should be a statement that says "Federally insured by the NCUA" at the bottom of its website.
Can I lose money in a money market account?
In most circ*mstances, you cannot lose money in a money market account. Money market accounts are bank accounts that are federally insured for up to $250,000 per depositor, per account ownership category. However, if you have more than that in a money market account, it isn't guaranteed you'll have access to all your money in the event of a bank failure.
What happens if I withdraw money from a CD before the term ends?
If you withdraw money from a CD before the term ends, you'll will likely have to pay a penalty. An early withdrawal penalty is usually some of the interest you earned on the account.
How do I choose the right type of savings account for me?
To choose the right type of savings account for your needs, think about savings goals and whether you'll need frequent access to your money. To help narrow down your options between a specific type of savings account, you can look at specific features like fees, interest rates, and minimum opening deposit requirements.
Do I need more than one type of savings account?
You can open more than one type of savings account if fits your goals and you can maintain multiple savings accounts at once. For example, you might decide to open CDs and a high-yield savings account at the same bank because you want to save for different goals and take advantage of competitive interest rates. Or, if you're a parent who wants to open a savings account for your child, you might decide to open a kid's savings account while you already have a savings account opened.
Should you put money into a savings account or invest?
If you don't have at least three to six months' expenses saved for an emergency, you should focus on saving before diving too deep into investing. If you've already established an emergency fund, there's a general rule of thumb when deciding whether to invest or save. If you need hte money in five years or less, you probably want to keep it in a savings account. Investing could be a good way to earn more money over time for money you'll need more than 5 years down the road.
What type of savings account earns the most money?
A CD with a longer term — probably five years or longer — will probably earn you the highest interest rate. But if you can't part with your money for five years, a CD with a shorter term is a good option. Otherwise, a high-yield savings account or money market account could be a good alternative if you want quicker access to your savings. Some specialty accounts, such as Roth IRAs or health savings accounts, will earn you the most money in the long term, which is why they're good accounts for saving for retirement.
Personal Finance Reviews Editor
Laura Grace Tarpley (she/her) is a senior editor at Personal Finance Insider. She oversees coverage about mortgage rates, refinance rates, lenders, bank accounts, and borrowing and savings tips for Personal Finance Insider. She was a writer and editor for Business Insider's "The Road to Home" series, which won a Silver award from the National Associate of Real Estate Editors. She is also a Certified Educator in Personal Finance (CEPF).She has written about personal finance for over seven years. Before joining the Business Insider team, she was a freelance finance writer for companies like SoFi and The Penny Hoarder, as well as an editor at FluentU. You can reach Laura Grace at ltarpley@businessinsider.com.
Banking Editor
Sophia Acevedo is a banking editor at Business Insider. She edits and writes bank reviews, banking guides, and banking and savings articles for the Personal Finance Insider team. She is also a Certified Educator in Personal Finance (CEPF).Sophia joined Business Insider in July 2021. Sophia is an alumna of California State University Fullerton, where she studied journalism and minored in political science. She is based in Southern California.You can reach out to her on Twitter at @sophieacvdo or email sacevedo@businessinsider.com.Read more about how Personal Finance Insider chooses, rates, and covers financial products and services >>Below are links to some of her most popular stories:
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