11 Types of Savings Accounts: These Are the Best Places To Save Your Money

01/05/2024

Piggy bank.

Savings accounts provide a way to earn interest, often in a government-insured package. Numerous types of savings accounts are available, and while they all share certain characteristics, they also have different structures and financial goals.

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What Are the 11 Different Types of Savings Accounts?

Here’s a close look at 11 of the most popular savings account types.

1. Traditional Savings Accounts

Who they are best for: Customers looking for their first savings account or those who need to open other accounts at certain institutions such as credit unions.

Traditional savings accounts are a type of deposit account that is meant to store your money for future use. The primary benefit of traditional savings accounts is that it’s a more secure way to save money than storing it in a piggy bank or under your mattress.

Savings accounts are similar to checking accounts in that you can access your money at all times, but some might have a restriction on the number of withdrawals you can make. Some savings accounts, similar to some checking accounts, incur a fee if your balance drops below a certain amount.

Pros

Traditionally pay interest
Comes with FDIC insurance
Secure way to save money while still having fee-free access to it

Cons

Interest may be low
Certain withdrawals are limited to six per month
Little incentive to leave the money untouched

2. High-Yield Savings Accounts

Who they are best for: Customers seeking the top yields while still protecting the principal amount.

As the name implies, high-yield savings accounts pay higher interest rates than traditional savings accounts. To qualify for the higher annual percentage yield, your bank or credit union will provide a list of requirements you must meet, like a set number of transactions or deposits. One of the ways high-yield savings accounts differ from traditional ones is that you don’t have unlimited withdrawals. Some banks limit how often you can withdraw.

Before choosing a banking institution to open a high-yield savings account at, review their APY requirements thoroughly — maybe even with a representative. According to the FDIC, examiners worry that bankers aren’t explicit enough in promotional materials about high-yield savings account requirements.

Pros

Usually have the highest available annual percentage yields for savings accounts
Limited access to money so it can grow
Low-risk type of investment

Cons

Many banks with top-tier savings yields don’t have physical locations
Some banks aren’t explicit about APY requirements
Some banks limit number of withdrawals

3. Joint Savings Accounts

Who they are best for: Customers combining funds with a partner, spouse or other trusted individual.

Joint savings accounts are almost identical to traditional ones with one main difference — two primary account owners. Each owner is legally entitled to manage the affairs of the account. This makes joint accounts very convenient for couples.

Pros

Either owner can usually conduct transactions without the other present
A joint account makes it easier to cover household expenses
Meet your savings goal faster with multiple people contributing to the account

Cons

One owner could theoretically drain the account without the other’s permission
If the relationship ends, separating assets could be messy
If you want privacy, you would need a separate account

4. Student Savings Accounts

Who they are best for: Students looking to get their first banking accounts.

A student savings account is a beginning savings account designed to let students gain experience managing their own money while also getting access to necessary financial products. A student savings account often provides perks such as no fees.

Pros

Young account holders can learn more about money and finances
Often have no monthly fees
Accounts typically have perks

Cons

May have limited services compared with other bank accounts
If the student doesn’t have an ID, they may not qualify to open an account

5. Health Savings Accounts

Who they are best for: Investors with high-deductible health plans seeking a tax-advantaged way to save for medical expenses or retirement.

A health savings account is a savings account used to save for “qualified” medical costs. Contributions are tax-deductible and withdrawals can be tax-free, but you’ll need a high-deductible health insurance plan to qualify for an HSA. This is a great option for people who don’t get sick often because your savings roll over yearly. There’s great potential to accumulate savings for when you need them most.

Pros

Tax-advantaged way to save for healthcare expenses
Monthly premiums are typically lower on HDHPs
Your balance could roll over each year

Cons

Penalties on withdrawals for nonhealthcare expenses
Requires a high-deductible health plan to open
A serious medical emergency could potentially wipe out all your savings

6. College Savings Accounts – 529 Plans

Who they are best for: Customers seeking a tax-advantaged way to save for educational expenses.

College savings accounts, or “qualified tuition plans,” are tax-advantaged savings plans designed to encourage people to save up for education costs. Contributions and earnings grow tax-free when distributions are used for qualifying educational purposes like tuition, fees, room and board.

Pros

Tax-advantaged way to save for educational expenses
Minimal impact on financial aid eligibility
Money can be used to pay for tuition, mandatory fees and lodging

Cons

Might have high fees and limited investment options
Only some states eligible for tax breaks
There are withdrawal penalties

7. Money Market Accounts

Who they are best for: Customers looking for higher yields than traditional savings or checking accounts, or those looking for check-writing access to their savings account.

Money market accounts are a hybrid version of a checking and a high-yield savings account. Like savings accounts, they carry FDIC insurance, and certain withdrawals are limited to six per month. One of the main differences between a money market account and a basic savings account is that you can often write checks against a money market account.

Pros

Can write checks against the account in addition to earning interest
Comes with FDIC insurance
Considered a low-risk investment

Cons

Some withdrawals are limited to six per month
Many money markets have higher minimum balance requirements to open accounts and/or avoid fees
Monthly fees can be high

8. Certificates of Deposit

Who they are best for: Customers seeking fixed yields and government insurance.

Certificates of deposit are time deposits that pay you a set interest rate on the principal amount over a predetermined period. CDs often have maturities between three months and 10 years, with longer terms often paying higher rates. CDs carry the same FDIC insurance as many savings accounts but usually have penalties if you take money out before they fully mature.

Pros

FDIC insurance and fixed interest rates, often higher than those paid by traditional savings accounts
More incentive to leave the money alone to grow
Can purchase from multiple places — banks, brokerage firms, independent salespeople

Cons

Penalties for early withdrawal
Inflation could impact your payout over time
Chance of fraud with unlicensed or uncertified brokers

9. Traditional IRAs

Who they are best for: Investors looking for a tax deduction on their contributions to long-term savings.

Individual retirement accounts let you save for your retirement while enjoying tax benefits along the way. Qualifying contributions for traditional IRAs go into the account pre-tax, grow tax-deferred until retirement and include tax-deductible contributions.

Pros

Tax-advantaged savings vehicle for retirement
Potential tax deduction for contributions
Can contribute more when you’re over 50

Cons

Withdrawals of both contributions and earnings are taxable
Most distributions before age 59 1/2 are hit with a 10% penalty
Tax benefits limited for employer-sponsored plans

10. Roth IRAs

Who they are best for: Investors anticipating a higher tax rate after retirement, or those who don’t need a current tax write-off on their tax-advantaged savings contributions.

A Roth IRA is a special type of IRA in which contributions are made on an after-tax basis but from which qualified retirement contributions can be taken tax-free.

Pros

No taxation or penalization for withdrawals after 5 years or age 59 ½
No taxation at any time for withdrawal of contributions
You can contribute more when you pass the age of 50

Cons

No tax benefits for the year you deposit
You must be below a certain income amount to contribute

11. 401(k) Retirement Plans

Who they are best for: Workers looking for tax-advantaged long-term savings and employer contributions to their retirement accounts.

A 401(k) plan offers similar tax advantages to a traditional IRA, except 401(k) plans are sponsored by employers rather than individuals. They also carry higher contribution limits.

Pros

Tax-advantaged accounts for retirement savings
Possible employer match
Can contribute more than IRAs

Cons

Withdrawals are limited until retirement
10% penalty for most distributions before age 59 1/2
There is a contribution ceiling

Which Type of Savings Account Is Best?

The best type of savings account for you is the one that meets your financial needs. For some customers, that means the highest APY available. For others, a completely fee-free account fits the bill. Some customers might value international ATM access or fee rebates.

The bottom line is that no one account can do everything, so you should research the features and benefits of the different types of savings accounts you are considering to determine which is the best fit.

Explore More on Savings Accounts

FAQ

Here’s a quick look at some of the more common questions surrounding savings accounts.

What are the four types of savings plans?
- The four main types of savings plans are:
  - Emergency fund: Emergency funds are for exactly what the name says, emergencies, and typically hold 3-6 months of living expenses. This savings account is to help you in case you fall on hard times or have an unexpected expense.
  - Rainy day fund: This fund, sometimes called “fun money,” is typically used for small, planned expenses. You’d use money from this fund for things like birthday gifts, vacations and other similar costs.
  - Big buy fund: This account is for a planned big purchase. This may be for an item you know you need but can’t purchase on a whim. A big buy could be a car, a house, a computer or something else.
  - Long-term fund: A long-term savings plan that can help secure you in retirement or your family if you pass away unexpectedly.
What are the four savings accounts everyone needs?
- Four savings accounts to consider having are the following:
  - A high-yield savings account: Great for building an emergency fund. You have access to your money when you need it, but it grows while it’s sitting.
  - A traditional savings account: A good option for a rainy day fund. It stays separate from your everyday spending money, but you still have close enough access to use it right when you need it. And since most banks have a limit on how many transfers you can make in a month, there’s some incentive to be strategic about how frequently you dip into that fund.
  - A certificate of deposit: Works well for a big buy fund because you can write a check when you’re ready to make your big purchase, but enjoy the growth benefits of letting your money sit while you’re waiting.
  - A retirement account: The best option for the long-term fund. They’re designed to help you accumulate wealth over time and help lower your personal tax burden.
What are the main types of savings accounts?
- You can separate savings accounts into three broad categories. Each category offers different features and levels of access to your money.
  - Savings accounts: These are the most basic type of accounts used to save money. The main difference between savings and checking accounts is their purpose. Checking accounts are intended to hold funds you need for everyday use while saving accounts are meant to secure your money safely for the future. Savings accounts can be goal-specific, like health savings accounts and college savings accounts.
  - Money market accounts: Money market accounts are a hybrid between high-yield savings accounts and checking accounts. You get higher interest rates than a regular savings account, but some of the the liquidity of a checking account.
  - Certificates of deposit: These accounts pay higher interest than savings accounts or money market accounts, but assess penalties for withdrawals before maturity. CDs are good options for long-term savings goals.