Which Type of Saving Account Fits Me Best?

Which Type of Saving Account Fits Me Best?

Whether you're employed or own a business, a savings account can be a safe place to keep the money for a rainy day. As many financial experts would advise, you can't spend money that you don’t have, and keeping it somewhere you can't access with ease, helps limit unnecessary spending. Savings accounts come in different forms. Some restrict access to your money, while others have a fixed interest rate for a specific time period. Savings accounts can be used for short-term goals like emergency funds or long-term goals, such as saving up to buy a car or a home. That said, you must choose carefully the type of savings account that matches your financial needs. You need a high-yielding account that can help your cash grow. Below, you’ll find valuable information on which type of savings accounts to pick.

High Yield Savings Account

A high yield savings account has a higher annual percentage yield (APY), meaning it boosts your savings faster. These accounts offer a higher interest rate compared to a regular savings account.

When choosing a high yield savings account, you want to find one with an APY greater than the average 0.05 percent offered by most U.S. banks. However, it's important to point out that the APYs are variable, which means they can fluctuate at any period, depending on how strong the economy is.

Online banks usually offer high yield savings accounts targeting savers who wish to earn a better interest rate than that offered at bring-and-mortar banks or credit unions. It’s a great option for those willing to manage their accounts via mobile or online banking rather than visiting a branch. Apart from the better rates, online banks charge lower fees.

Axos High Yield Savings Account offers one of the highest APY of up to 0.61 percent, provided you meet specific requirements, like a minimum deposit of $250. It doesn’t charge excessive transactions fees or overdraft fees and allows up to six free withdrawals or transfers per statement cycle.

Ally is also a reliable player when it comes to online banking and has nabbed several top awards for online banking. It's, especially a favorite among millennials who praise it for ease of access.

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Regular Savings Account

Traditional savings accounts are what you typically find at conventional banks and credit unions. These accounts pay lower rates compared to other savings products. Regular (basic) savings accounts don’t have many requirements and have a low minimum deposit.

They have some limitations, including six withdrawals per month. Exceeding the limit may attract some fees. Most banks let you manage these accounts via mobile or online banking, or by phone or at a branch.

Marcus by Goldman Sachs High Yield Online Savings is a good option with an annual percentage yield (APY) of 0.50 percent. You only need $1 to start earning interest, and there are no fees charged on overdrafts and excessive transactions.

Money Market Accounts

If you want a savings account that gives you more options for accessing your money, then a money market account (MMA) or money market savings account (MMSA) is a good pick.

Not to be confused with a money market fund, a type of investment account, money market accounts offer better interest rates than regular savings accounts. They even let you write checks from your account, as well as access your money via an ATM or debit card.

Money market accounts combine the features of a checking account, and regular savings account to help you manage your cash better.

Just like high yield accounts and regular savings accounts, banks may attract fees for exceeding the limit of six withdrawals per month. Deposits of up to $250,000 in a bank MMA are insured by the FDIC while the money held in a credit union MMA is insured by the NCUA.

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Certificate of Deposit Account

Certificate of deposit accounts (CDs) is ideal for individuals who are saving with a defined target in mind. These accounts are available through most financial institutions, as well as some brokers, and pay a higher interest rate than regular and online savings accounts. This is because a fixed amount of your funds is invested with the financial institution for a set length of time.

With CDs, the longer the term, the higher the interest rate paid. When your funds reach maturity, the institution will usually reinvest the cash in a new CD for the same term, unless you withdraw your money.

CDs are available at traditional and online banks, with online banks offering better interest rates. These accounts are perfect to keep money that you won't need immediately. If you withdraw your money before maturity, the bank will charge an early withdrawal penalty.

An institution like Ally is a good match since it offers some of the highest rates on long-term CDs and doesn’t have a minimum deposit requirement.

Choose a CD carefully, bearing in mind the time limit you need to keep the money. For instance, don’t go for a CD with a longer term if you’ll be needing the cash relatively soon. You’ll just end up paying an early withdrawal fee.

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