5 Savings Account Types You Should Know

You know you should be saving, but do you know where your money should go? There are several different account types to choose from, and they all serve different purposes. We're going to go over 5 different types of savings accounts to determine which one is right for you.

1) Traditional Savings- These accounts are usually linked to your regular checking account and collect interest.

- Easy to withdraw funds quickly

- Limited to six withdrawals per month

- Tend to have the lowest interest rate

Good For: Short-Term purchases that require easy access to funds to pay for.

2) High-Yield Savings- These accounts can typically be found in online-only banks. You can usually request an ATM card for cash withdrawals, but these types of accounts are meant to make the withdrawal process a bit harder, so you are more likely to keep your money where it is.

- Tend to pay out higher interest rates than regular banks

- Limited to six withdrawals per month

- Withdrawing funds typically take longer

Good For: Longer-Term purchases and savings that you won't be tempted to pull from.

3) Money Market- These are federally-insured, just like regular savings accounts, and tend to pay higher interest rates. Money Market Funds are different and are a type of investment account.

- Can usually open this type of account at a regular bank or credit union

- Typically requires a minimum balance

- May require a minimum balance to avoid monthly fees

Good For: Long-term savings strategy if you are comfortable with fluctuating interest rates

4) Certificate of Deposit- The purpose of CDs is to keep your money where it is. You do not have access to the full funds until the maturity date of the CD. If you withdraw early, you will pay an early withdrawal fee.

- Terms range from 6 months- 5 Years

- The longer-term you choose, the better return rate you'll receive

- More competitive rates can be found in online-only banks

Good For: Long-Term savings strategy if you want a guaranteed return

5) Specialty Accounts- These accounts offer special tax incentives for utilizing specific account types for longer-term or ongoing usage. They also tend to offer higher interest returns.

- College Funds (529 Savings Plan)

- Health Expenses (Health Savings Plan (HSP))

- Roth IRA

Good For: Long-term savings for specific purposes

When you're starting out, it's best to choose 1 or 2 options to see which ones best suit your needs. It's not uncommon to have multiple savings accounts that each serve a specific purpose. Whatever you decide to go with, make sure you double-check the fine print for any fees, minimum balances, withdrawal penalties, fluctuating rates, term-length, and more. Every institution has its own set of rules separate from federal guidelines, so be sure to do your due diligence before opening an account.