Best Types of Savings Accounts

Saving money is important for many reasons. You may have a particular savings goal in mind for a major purchase, such as a home.


Alternatively, you may wish to create a fund on which you can rely in an emergency situation. Whatever your reason is, it is important to find the best way to keep your money safe. Making your money work for you should also be a top priority. Those priorities can easily be met when you open a savings account.

The account will keep your money secure and accessible to you. Simultaneously, the money will earn interest, which would not be earned through other money-saving means, such as keeping your money in a safe in your home. When selecting a savings account, you must understand there are several types of savings accounts. Each of them has unique benefits. Below is a brief overview of the best types of savings accounts.

Traditional Savings Accounts

A traditional savings account is a standard savings account you can open at your local bank. A traditional savings account will accumulate interest and have Federal Deposit Insurance Corporation (FDIC) protection. Traditional savings account interest rates vary, so you will have to check the rate at your chosen bank. However, 2017 FDIC data indicated the national average savings account interest rate for the year was only .06 percent.

Although your interest rate may be low when you open a traditional savings account, the account may have other desirable benefits. For example, you may be able to view your savings account statements online. You will also be able to withdraw money from the account without having to wait for the account to mature, as you would with certain other types of accounts. Although, there may be a limit imposed by your bank regarding how many withdrawals you can make per year. Minimum balance fees may also be imposed. However, you may be able to create a checking account at the same bank and link the two accounts. Doing so will allow you to transfer money when needed to avoid such charges.

Student Savings Accounts

If you are a student, you may not be working or may only be working part-time. Therefore, you may have difficulty maintaining the minimum balance required for a traditional savings account. Rather than paying fees for dropping below your minimum balance, consider opening a student savings account. Your local bank may offer such an option.

A student savings account has no minimum balance requirement. Therefore, you can deposit whatever money you are able to set aside without fear of having to pay fees you cannot afford. However, you must check the policy outlined by your bank to see how long you can maintain your student account. There may be a time limit. At the end of that time period, the account may be automatically converted to a standard savings account. Then you will be subject to any minimum balance fees associated with the standard savings account policy at your bank.

Online Savings Accounts

Online savings accounts are similar to traditional savings accounts. However, you can find online savings accounts that have no minimum balance requirements and no associated fees. Also, online savings account interest rates are often higher than those offered by local banks. Online savings accounts can also be started using money transfers from almost any other bank. When you open such accounts, you may also be mailed cashier’s checks or given access to online checking capabilities so you can access your money, when necessary.

Prior to opening an online savings account, you must understand how it works fully. For example, if you need assistance with your online bank account, you will not be able to seek help in person at your local bank. Communication with the online bank representatives will be exclusively through email or phone calls. Therefore, you must make sure your chosen online banking company has a good reputation before depositing your money.

Money Market Deposit Accounts (MMAs)

A money market deposit account is similar to traditional savings account in many ways, including the fact it is insured by the FDIC. You typically cannot start an MMA unless you meet a higher minimum balance requirement than usually required for a standard savings account. Therefore, opening an MMA is an ideal way to create a large household emergency fund or save for another large dedicated purpose. If you open an MMA, you may get a higher interest rate than you would from a traditional savings account. Also, you will have more options for accessing your money. For example, you may be issued a debit card or checks you can use to transfer money from your MMA for various purposes.


One of the potential drawbacks of opening an MMA is you will be limited as far as how often you can withdraw money from your account. You may also be required to maintain a high minimum balance or adhere to minimum deposit amount requirements. Additionally, you may be required to pay a monthly fee to keep your MMA account open. If such a fee is charged to you, it may negate too much of the interest you earn to be worth keeping the account open. Therefore, you must carefully examine the policies relating to a specific MMA before opening the account.

Certificate of Deposit (CD) Accounts

A certificate of deposit account is somewhat like a traditional savings account. As with a standard savings account, your money will be insured by the FDIC. However, you will not be able to withdraw money from the account in the same way you could from a savings account. Instead, your CD account will have a designated maturity time. The time may be several months or several years. When the maturity date comes, you will be given back your money, with interest. The interest rate of a CD account is often higher than the interest rate of a traditional savings account.

When opening a CD account, you must read the terms presented by the bank carefully, first. The early withdrawal terms are particularly important because you may wind up needing your money before the CD matures. Your bank may allow you to withdraw the funds early, but you may be required to pay a high fee for doing so. There is also a possibility you will be prevented from making an early withdrawal entirely. It is best to be clear about those terms from the outset to avoid financial hardships and unwelcome surprises in the future.


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