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Saving for success – 8 types of savings accounts

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Which type of savings account is right for your financial goals?

Most Americans have checking accounts – they’re great places to keep cash safe in the steel vaults of banks and credit unions. But while checking accounts are very convenient when paired with a checkbook or debit card, they aren’t the best places to keep the money you intend to save for the future.

What could be better? Savings accounts, where you can tuck away money from time to time and watch those savings grow with each deposit. With the right savings account, you can keep your emergency funds safe for years… and even add money to your savings through interest.

Not sure which type of savings account is ideal for your financial goals? Let’s compare the types of savings accounts against each other so you know which to pick.

How does a savings account work?

In a nutshell, a savings account is a safe place where you can store your money until you need it. But a savings account isn’t the same as a checking account. By keeping your savings at a bank or credit union, you’ll benefit from savings insurance.

Thanks to insurance from the Federal Deposit Insurance Corporation or FDIC, any money you deposit at a bank’s savings account is insured for up to $250,000 per account. So, if the bank burns down, you can get most or all of your money back.

Even more importantly, the money you deposit in a savings account can earn an amount of interest each month. The longer you keep your savings and the more money you deposit, the more money the bank will pay you each year. You heard that right.

Ready to apply for a savings account? Not so fast! First you need to know which account type to apply for.

Regular savings accounts

“Regular” savings accounts are standard accounts you can use to hold cash for all kinds of needs, including saving up to buy a home.

Standard savings account

A traditional or standard savings account is great for normal saving needs. Say that your car breaks down but you don’t want to take out an auto repair loan. If you’ve saved wisely, your savings account could hold the cash you need for fast fixes.

With a standard savings account, you’ll get a reasonable APY or annual percentage yield as your interest rate – that’s how much the bank will add to your account each year. You’ll also be able to open a regular savings account with a low minimum deposit.

You may wish to choose a standard savings account if you can open one at the same banking institution where you have your checking account. If your savings account and checking account are with the same bank, for example, transferring money between either account is usually quick and simple.

High-interest savings account

These accounts are exactly what they sound like: savings accounts with higher than average interest rates. They’re best if you want to save a lot of money and earn more interest each year, especially if you plan to save for the long-term.

Because interest increases with the principal amount you deposit, high-interest savings accounts are best if you have a big lump sum to deposit initially and plan to add to it substantially over time.

However, high-interest savings accounts are usually offered by online banks. So you may not be able to open a high-interest savings account at your normal banking institution or credit union. Additionally, you won’t be able to quickly withdraw money from these savings accounts in an emergency, such as sudden medical bills.

Retirement savings accounts

Other savings accounts are intended specifically for building up a retirement sum so you can enjoy your golden years comfortably. Let’s break down the three major types of retirement savings accounts: IRAs vs. Roth IRAs. vs. 401(k)s.

Three stacks of coins with wood blocks on them that have the types of savings accounts, Roth, IRA, and 401k, printed on the wood blocks.

IRA accounts

An IRA or individual retirement account is the most basic type of retirement account. With an IRA, you deposit money into the account at regular intervals and the money is invested into safe stock market assets like bonds, mutual funds, and more. Traditional IRAs only allow you to contribute $6000 per year, however, or $7000 per year if you are over 50 years old.

Roth IRA accounts

Roth IRAs are similar to traditional IRAs with one key difference: you pay taxes on the money you deposit into the account upfront.

Like traditional IRAs, Roth IRAs only let you deposit $6000 per year or $7000 per year if you are over 50.

401(k) accounts

Also called 401(k) plans, 401(k) retirement savings accounts are tax-deferred accounts that employers offer to their employees.

401(k)s have a big advantage: most employers match their employees’ savings deposits up to a certain amount or percentage, like 5% of your paycheck. In 2021, the 401(k) deposit limit is $19,500.

401(k)s can usually be transferred between employers, too, allowing you to continue to grow your retirement savings even if you switch jobs.

Special savings accounts

Most people will use a standard or retirement savings account. But there are a few other savings account types to keep in mind – let’s take a look!

Certificates of deposit

Certificates of deposit or CDs are timed savings accounts. When you use a certificate of deposit, you deposit your cash for a set amount of time and can’t withdraw it early without a penalty. These accounts have higher than average interest rates in exchange.

After the CD expires, the account “matures” and you can withdraw your money from it or deposit it into a new CD. If you try to withdraw your money from the CD before the maturity date, however, you’ll have to pay fees.

All in all, certificates of deposit are best if you know you won’t need the money you intend to save in the near future.


A mother and daughter discussing opening a savings account with a banking representative

Money market accounts

Last but not least are money market accounts. They’re great if you want to earn good interest on your savings but also want to be able to access your money quickly in a pinch.

Think of these as basic savings accounts that also come with some of the features of normal checking accounts, like checks or cards. Many money market accounts also let you access your savings through ATMs.

However, these hybrid accounts do have some limitations. For instance, some money market accounts impose fees if you make too many withdrawals within a month. Still, money market savings accounts could be worthwhile thanks to their versatility and their high interest rates.

Apply for an account and save!

There’s a savings account with your name on it no matter what you need. It all depends on what you’re saving for, how much money you plan to save, and what features or benefits you want your account to have.

But what if you don’t have a savings account, but still need cash fast for home improvement, debt repayment, or something else? The right loan could be just the ticket. Once you’ve got the loan you need, you can start building a long-term savings with a dedicated savings account.

**The information in this article should not be construed as financial or tax advice. Please consult your financial advisor when making choices about investments to fully understand all tax implications.**

The information and materials provided on this website are intended for informational purposes only and should not be treated as an offer or solicitation of credit or any other product or service of Regional Finance or any other company. This website may contain links to websites controlled or offered by third parties. We have not reviewed all of the third-party sites linked to this website and are not responsible for the content, products, privacy policy, security, or practices of any linked third-party website. The inclusion of any third-party link does not imply any endorsement by Regional Finance of the linked third party, its website, or its product or services. Use of any third-party website is at your own risk.

Sources accessed 9/8/2021 –

Deposit Insurance FAQs

Retirement Topics – IRA Contribution Limits

Retirement Basics: What Is A 401(k) Plan?

Retirement Topics – 401(k) and Profit-Sharing Plan Contribution Limits

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