Types of Saving Accounts: Which One Is Right for You?

Types of Saving Accounts: A Complete Guide to Choosing the Right Account

The first step to creating financial stability is saving money. Different types of Saving accounts help you reach goals, whether they’re short-term (e.g. vacation) or long-term (e.g. emergency fund). Saving can become much simpler when you know the right kind of accounts to use.

These days there are so many saving account options to choose from. Some accounts can help you reach your goals when you have money set aside, while others help you when you are looking to earn more long-term interest with specific account and savings requirements.

Knowing the differences in savings accounts allows you to work towards your financial goals with greater efficiency.

What Is a Savings Account?

A savings account consists of putting money away in a secured area while you potentially earn some interest. Banks and credit unions have different savings account options with different terms and rates.

A types of Saving accounts savings account is not a checking account. If you are a daily spender a savings account would not see a lot of daily activity. A savings account is meant to be used for long-term saving. Accounts that separate money help you become more efficient with saving for long-term goals.

1. Traditional Savings Accounts

A traditional savings account is the most basic and common savings account. Accounts of this type are usually offered through a bank or credit union and tend to have access through branches, ATMs, online banking, and mobile banking, etc.

 

This account type is well suited to individuals who look for easy account management. With frequent deposit opportunities to easily maintain savings out of your everyday spending. Check the interest rates, maintain balance, transaction fees, and ease of withdrawing funds before account selection.

2. High Yield Savings

The premier spot for a high yield savings account can be found at an online bank. Standard savings accounts offer a less competitive yield.

The interest on your funds is critical (so look for high APYs), but so are the accounts’ other terms (e.g., minimum balance, monthly fees, direct deposit, or other specific account terms).

These accounts are excellent options for individuals looking for a high yield associated with funds that need to remain readily available.

3. Money Market

Like other types of Saving accounts, money market accounts also have their niche. Money market accounts offer a blended savings and transaction account model.

Money market accounts can have an attractive yield and offer efficient check writing capability. Money market accounts are a good way to earn yield on available savings with accessibility.

Please note that conditions and rules concerning a transaction can vary. Be sure to read through the account terms prior to account opening.

4. Certificates of Deposit

Although similar to types of Saving accounts, certificates of deposits or CDs, require a longer period of not touching your money to earn a fixed interest rate over that period, usually varying from months to years.

Because money that is allocated to a CD account is locked in and unavailable over the period of time agreed upon, a CD is an appropriate vehicle for funds that are not required for a longer period of time. However, such funds may incur an early withdrawal fee. CD accounts, therefore, should not be used for funds that could be required at any time.

5. Specialty Savings Accounts

Specialty Savings accounts tailored for a particular purpose or audience can be offered by some banks and credit unions. These may include children and family savings accounts, savings accounts for educational goals, or even accounts designed for goal directed savings.

 

Specialty Savings accounts can be purposed as motivators for savings earmarked for a particular goal. Specialty Savings accounts should be analyzed like any other Savings account for interest rates, fees, withdrawal policies and terms and conditions when compared to other accounts.

How to Choose a Savings Account

Choosing among the different type of saving accounts can be a daunting process. However, deciding why you save and how quickly you may need the money to be made available can help.

• What is my savings goal?
• How quickly may I need the money?
• Do I like getting a good interest rate?
• Is there a monthly balance I have to maintain?
• Does the account include any monthly fees?
• Are there fees I have to pay to withdraw my money?
• Do I do most of my banking in person or online?

Your choices will help explain your preferences.

Interest Rate Comparison

You should definitely compare interest rates when choosing the best options for a savings account. Getting a higher rate may be a good way to get your money growing, but there are many other factors to consider. For example, some rates are variable and can change on you.

Having a good interest rate is great, but a bad savings account can quickly eat into your potential earnings with high fees.

Account Accessibility

How easy is it to get my money? Your choice may depend on your savings goals. If you are saving for a rainy day, then the account access should allow you to access your money easily.

You can have account accessibility restrictions the longer you can afford to go without accessing the money you have saved.

Set a Goal With a Savings habit

Chose your savings account, and come up with a plan to save a certain amount every month. Set a goal and you are one step closer to a habit that is great for your financial future. Automating transfers to your savings account can eliminate the hassle of saving money.

Make savings goals for things like emergencies, planned larger purchases and travel, or education. Save money towards your goals and tracking your progress will keep you motivated

Final Thoughts

By knowing your options for different kinds of savings account, you can better choose the place to put you money. Simplicity is the hallmark of traditional savings accounts. High-yield savings accounts provide the opportunity for higher interest. A money market account is a combination of savings and potentially easier withdrawals. CDs can be a good option for money you will not need to access for extended time periods.

There is no best savings account for everyone. Take into account your desires and sacrifices of time, accessibility, interest, fees, and requirements when selecting an account. Above all else, pick a types of Saving accounts that fits your planning for regular saving. Check out money tips for saving, budgeting, and intelligent spending personally at pocketwisetip.com.