There are 6 types of saving accounts, and the best option for you depends on how and when you want to access your money

By Laura Grace Tarpley, CEPF

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A checking account is a good place to store money you need for rent, daily necessities, or a night out with friends. But it isn't ideal for saving for the future.

Checking accounts pay little to no interest on your money, and keeping your savings and spending money all in one place might make it a little too easy to spend your savings.

To remove temptation and watch your money grow, you'll want to open a savings account. There are several types of accounts to choose from, and your best fit will depend on your banking preferences, goals, and how soon you'll need to access your money.

Here are the six types of savings accounts:

Examples: Wells Fargo Way2Save Savings, TD Beyond Savings, Citi Savings Account

You can open a regular savings account with a brick-and-mortar bank or credit union, and some may allow you to open an account online.

These accounts pay low interest rates, sometimes as little as 0.01% APY. Most charge monthly service fees, but you may qualify to have them waived. You have the benefit of being able to speak to a banker face-to-face when you have a question.

Examples: Capital One 360 Performance Savings, Discover Online Savings Account, Chime Savings Account

Most high-yield savings accounts are available at online banks . These banks are just as safe as brick-and-mortar banks, as long as they have FDIC insurance to protect your money should something go wrong and the bank shuts down. With the exception of a few companies, such as Capital One, online banks don't have physical branches.

Because online banks don't have to pay for the expenses that come with a physical building, they can afford to pay you higher rates and charge lower fees. Most don't charge monthly service fees at all. 

You also don't need much money to get started. A few high-yield savings accounts require up to $100 as an opening deposit, but many don't ask for anything to open an account.

Examples: Axos Bank, CIT Bank, Sallie Mae

Money market accounts are similar to savings accounts. You can find them at either brick-and-mortar banks or online institutions. The best ones are usually online, though, because they tend to pay higher rates and charge lower fees.

The main difference between a money market account and savings account is that the former usually comes with a debit card or paper checks. This makes it easier to access your savings in a pinch, making money market accounts worthwhile options for storing your emergency fund.

Money market accounts typically have higher minimum deposits than savings accounts, maybe a few hundred or a few thousand dollars. You can find some banks that don't require any opening deposit, though.

Examples: Marcus High-Yield CD, Synchrony Bank CD, Discover CD

A certificate of deposit, or CD, can be a good savings tool if you don't need quick access to your money. Choose a CD term — probably between three months and five years — and keep your money in the account until the term ends.

Savings and money market accounts pay variable interest rates, meaning your rate can change after you've opened the account. But CDs pay fixed rates, so your rate is locked in once you've deposited the cash. This can be useful when rates are trending downward (as they have been the past few months), because you get to keep your higher rate even when bank rates decrease overall.

You can open CDs at both brick-and-mortar and online institutions, but online banks pay better rates. Regardless of which type of bank you choose, you shouldn't have to pay monthly service fees.

Examples: Wealthfront Cash Account, SoFi Money, Robinhood Cash Management

A cash management account is a hybrid checking/savings account, usually offered by an online banking platform. Although rates aren't as high as what you'll earn with most high-yield savings accounts these days, they're still higher than what you'd earn with a traditional savings or checking account.

Some cash management accounts pay the same rate on your entire balance, while others let you set up separate savings goals and pay interest just on your savings balances.

Online banking platforms such as Wealthfront, SoFi, and Robinhood aren't technically banks. Most of them actually specialize in investing, but they provide cash management accounts so you can keep your spending, saving, and investing money all in the same place. These platforms are partnered with real banks, so your money is still safe through FDIC insurance.

Savings and money market accounts legally limit you to six withdrawals per month. But because cash management accounts aren't technically savings accounts, you can make an unlimited number of transactions.

Examples: Health savings accounts, custodial accounts, IRAs

The types of savings accounts we've already mentioned can be great places to store emergency funds or save for goals like a down payment on a house. But if you want to save for retirement, your health, or child's future, you may want a specialty savings account.

For example, a health savings account is an account specifically for health-related costs, and you can invest funds to earn even more money to pay for medical expenses in retirement. Or you could open a custodial account for a child so they can have money for education, a car, or rent when they turn 18.

Before opening a specialty savings account, research whether you're eligible and if there are any restrictions regarding when you can withdraw money.

Why would you put money into a savings account?

A savings account is a better tool than a checking account for stowing away your money so you won't touch it. 

What's the point of putting money in a savings account, rather than just hiding it under your mattress? A mattress won't help you earn interest on your money.

If you hide $10,000 in your home, you'll still have $10,000 after five years. If you put that money in a high-yield savings account that pays an average of 0.50% APY (it may decrease or increase over the years) and compounds interest daily, that $10,000 turns into $10,253.14 over five years. And that's assuming you don't contribute any more money to your savings.

Should you put money into a savings account or invest?

First things first: Do you have three to six months' expenses saved for an emergency? If not, you should focus on saving before diving too deep into investing. (There are some exceptions to this. For example, if your employer offers a 401(k) match, you may want to take advantage of it.)

Otherwise, there's a general rule of thumb when deciding whether to invest or save:

  • Will you need the money in five years or less? You probably want to keep it into a savings account. The market fluctuates, so investing money you'll need in just a couple years is a risky move.
  • Will you need the money five years or more down the road? Investing could be a good way to earn more money over time.

Which savings account will earn you the most money?

A CD with a longer term — probably five years or longer — will probably earn you the highest interest rate.

But if you can't part with your money for five years, a CD with a shorter term is a good option. Otherwise, a high-yield savings account or money market account could be a good alternative if you want quicker access to your savings.

Some specialty accounts, such as Roth IRAs or health savings accounts, will earn you the most money in the long term, which is why they're good accounts for saving for retirement.

Which savings account will earn you the least money?

Traditional savings accounts will probably earn you the least money. Or a money market account or CD you open at a brick-and-mortar bank.

Brick-and-mortar institutions have to cover the costs that come with running multiple physical branches, so they typically pay lower interest rates and charge higher fees than online banks.

What is the best account for saving money?

There's no clear "best" type of savings account. It depends on what you want to get out of the account. Here are your options:

  • Traditional savings account: Best if you want to bank in person
  • High-yield savings account: Best if you want to bank digitally
  • Money market account: Best if you want a debit card or paper checks tied to your savings
  • CD: Best if you're comfortable not touching your money for a long time
  • Cash management account: Best if you want to keep your checking and savings in one account, and/or bank with the same company you use for investing
  • Specialty savings account: Best if you have a specific savings goal, including preparing for retirement, covering health expenses, or saving for your child's education

Maybe you already know which type of savings account you want, but you don't know which institutions have the best accounts. Insider has guides for our top picks for multiple types of accounts. Check them out here:

Keep in mind, you don't have to choose just one type of savings account. For example, you could open a high-yield savings account, CD, and Roth IRA. Think about you savings goals, then open the account(s) that will help you attain them.

Laura Grace Tarpley is the editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. She is also a Certified Educator in Personal Finance (CEPF). Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.