Savings accounts provide a way to earn interest, often in a government-insured package. Numerous types of savings accounts are available, and while they all share certain characteristics, they also have different structures and financial goals.
What Are the 11 Different Types of Savings Accounts?
Here’s a close look at 11 of the most popular savings account types.
1. Traditional Savings Accounts
- Who they are best for: Customers looking for their first savings account or those who need to open other accounts at certain institutions such as credit unions.
Traditional savings accounts are a type of deposit account that is meant to store your money for future use. The primary benefit of traditional savings accounts is that it’s a more secure way to save money than storing it in a piggy bank or under your mattress.
Savings accounts are similar to checking accounts in that you can access your money at all times, but some might have a restriction on the number of withdrawals you can make. Some savings accounts, similar to some checking accounts, incur a fee if your balance drops below a certain amount.
Pros
- Traditionally pay interest
- Comes with FDIC insurance
- Secure way to save money while still having fee-free access to it
Cons
- Interest may be low
- Certain withdrawals are limited to six per month
- Little incentive to leave the money untouched
2. High-Yield Savings Accounts
- Who they are best for: Customers seeking the top yields while still protecting the principal amount.
As the name implies, high-yield savings accounts pay higher interest rates than traditional savings accounts. To qualify for the higher annual percentage yield, your bank or credit union will provide a list of requirements you must meet, like a set number of transactions or deposits. One of the ways high-yield savings accounts differ from traditional ones is that you don’t have unlimited withdrawals. Some banks limit how often you can withdraw.
Before choosing a banking institution to open a high-yield savings account at, review their APY requirements thoroughly — maybe even with a representative. According to the FDIC, examiners worry that bankers aren’t explicit enough in promotional materials about high-yield savings account requirements.
Pros
- Usually have the highest available annual percentage yields for savings accounts
- Limited access to money so it can grow
- Low-risk type of investment
Cons
- Many banks with top-tier savings yields don’t have physical locations
- Some banks aren’t explicit about APY requirements
- Some banks limit number of withdrawals
3. Joint Savings Accounts
- Who they are best for: Customers combining funds with a partner, spouse or other trusted individual.
Joint savings accounts are almost identical to traditional ones with one main difference — two primary account owners. Each owner is legally entitled to manage the affairs of the account. This makes joint accounts very convenient for couples.
Pros
- Either owner can usually conduct transactions without the other present
- A joint account makes it easier to cover household expenses
- Meet your savings goal faster with multiple people contributing to the account
Cons
- One owner could theoretically drain the account without the other’s permission
- If the relationship ends, separating assets could be messy
- If you want privacy, you would need a separate account
4. Student Savings Accounts
- Who they are best for: Students looking to get their first banking accounts.
A student savings account is a beginning savings account designed to let students gain experience managing their own money while also getting access to necessary financial products. A student savings account often provides perks such as no fees.
Pros
- Young account holders can learn more about money and finances
- Often have no monthly fees
- Accounts typically have perks
Cons
- May have limited services compared with other bank accounts
- If the student doesn’t have an ID, they may not qualify to open an account
5. Health Savings Accounts
- Who they are best for: Investors with high-deductible health plans seeking a tax-advantaged way to save for medical expenses or retirement.
A health savings account is a savings account used to save for “qualified” medical costs. Contributions are tax-deductible and withdrawals can be tax-free, but you’ll need a high-deductible health insurance plan to qualify for an HSA. This is a great option for people who don’t get sick often because your savings roll over yearly. There’s great potential to accumulate savings for when you need them most.
Pros
- Tax-advantaged way to save for healthcare expenses
- Monthly premiums are typically lower on HDHPs
- Your balance could roll over each year
Cons
- Penalties on withdrawals for nonhealthcare expenses
- Requires a high-deductible health plan to open
- A serious medical emergency could potentially wipe out all your savings
6. College Savings Accounts – 529 Plans
- Who they are best for: Customers seeking a tax-advantaged way to save for educational expenses.
College savings accounts, or “qualified tuition plans,” are tax-advantaged savings plans designed to encourage people to save up for education costs. Contributions and earnings grow tax-free when distributions are used for qualifying educational purposes like tuition, fees, room and board.
Pros
- Tax-advantaged way to save for educational expenses
- Minimal impact on financial aid eligibility
- Money can be used to pay for tuition, mandatory fees and lodging
Cons
- Might have high fees and limited investment options
- Only some states eligible for tax breaks
- There are withdrawal penalties
7. Money Market Accounts
- Who they are best for: Customers looking for higher yields than traditional savings or checking accounts, or those looking for check-writing access to their savings account.
Money market accounts are a hybrid version of a checking and a high-yield savings account. Like savings accounts, they carry FDIC insurance, and certain withdrawals are limited to six per month. One of the main differences between a money market account and a basic savings account is that you can often write checks against a money market account.
Pros
- Can write checks against the account in addition to earning interest
- Comes with FDIC insurance
- Considered a low-risk investment
Cons
- Some withdrawals are limited to six per month
- Many money markets have higher minimum balance requirements to open accounts and/or avoid fees
- Monthly fees can be high
8. Certificates of Deposit
- Who they are best for: Customers seeking fixed yields and government insurance.
Certificates of deposit are time deposits that pay you a set interest rate on the principal amount over a predetermined period. CDs often have maturities between three months and 10 years, with longer terms often paying higher rates. CDs carry the same FDIC insurance as many savings accounts but usually have penalties if you take money out before they fully mature.
Pros
- FDIC insurance and fixed interest rates, often higher than those paid by traditional savings accounts
- More incentive to leave the money alone to grow
- Can purchase from multiple places — banks, brokerage firms, independent salespeople
Cons
- Penalties for early withdrawal
- Inflation could impact your payout over time
- Chance of fraud with unlicensed or uncertified brokers
9. Traditional IRAs
- Who they are best for: Investors looking for a tax deduction on their contributions to long-term savings.
Individual retirement accounts let you save for your retirement while enjoying tax benefits along the way. Qualifying contributions for traditional IRAs go into the account pre-tax, grow tax-deferred until retirement and include tax-deductible contributions.
Pros
- Tax-advantaged savings vehicle for retirement
- Potential tax deduction for contributions
- Can contribute more when you’re over 50
Cons
- Withdrawals of both contributions and earnings are taxable
- Most distributions before age 59 1/2 are hit with a 10% penalty
- Tax benefits limited for employer-sponsored plans
10. Roth IRAs
- Who they are best for: Investors anticipating a higher tax rate after retirement, or those who don’t need a current tax write-off on their tax-advantaged savings contributions.
A Roth IRA is a special type of IRA in which contributions are made on an after-tax basis but from which qualified retirement contributions can be taken tax-free.
Pros
- No taxation or penalization for withdrawals after 5 years or age 59 ½
- No taxation at any time for withdrawal of contributions
- You can contribute more when you pass the age of 50
Cons
- No tax benefits for the year you deposit
- You must be below a certain income amount to contribute
11. 401(k) Retirement Plans
- Who they are best for: Workers looking for tax-advantaged long-term savings and employer contributions to their retirement accounts.
A 401(k) plan offers similar tax advantages to a traditional IRA, except 401(k) plans are sponsored by employers rather than individuals. They also carry higher contribution limits.
Pros
- Tax-advantaged accounts for retirement savings
- Possible employer match
- Can contribute more than IRAs
Cons
- Withdrawals are limited until retirement
- 10% penalty for most distributions before age 59 1/2
- There is a contribution ceiling
Which Type of Savings Account Is Best?
The best type of savings account for you is the one that meets your financial needs. For some customers, that means the highest APY available. For others, a completely fee-free account fits the bill. Some customers might value international ATM access or fee rebates.
The bottom line is that no one account can do everything, so you should research the features and benefits of the different types of savings accounts you are considering to determine which is the best fit.
Explore More on Savings Accounts
- What Is a Savings Account? Learn Savings Account Basics
- How To Open a Savings Account in 4 Steps
- Checking vs. Savings Accounts: What’s the Difference?
- How Much Should I Have in Savings?
- 7 Strategies To Grow Your Savings Account to $1 Million
- Best Savings Accounts
FAQ
Here's a quick look at some of the more common questions surrounding savings accounts.- What are the four types of savings plans?
- The four main types of savings plans are:
- Emergency fund: Emergency funds are for exactly what the name says, emergencies, and typically hold 3-6 months of living expenses. This savings account is to help you in case you fall on hard times or have an unexpected expense.
- Rainy day fund: This fund, sometimes called "fun money," is typically used for small, planned expenses. You'd use money from this fund for things like birthday gifts, vacations and other similar costs.
- Big buy fund: This account is for a planned big purchase. This may be for an item you know you need but can't purchase on a whim. A big buy could be a car, a house, a computer or something else.
- Long-term fund: A long-term savings plan that can help secure you in retirement or your family if you pass away unexpectedly.
- The four main types of savings plans are:
- What are the four savings accounts everyone needs?
- Four savings accounts to consider having are the following:
- A high-yield savings account: Great for building an emergency fund. You have access to your money when you need it, but it grows while it's sitting.
- A traditional savings account: A good option for a rainy day fund. It stays separate from your everyday spending money, but you still have close enough access to use it right when you need it. And since most banks have a limit on how many transfers you can make in a month, there's some incentive to be strategic about how frequently you dip into that fund.
- A certificate of deposit: Works well for a big buy fund because you can write a check when you're ready to make your big purchase, but enjoy the growth benefits of letting your money sit while you're waiting.
- A retirement account: The best option for the long-term fund. They're designed to help you accumulate wealth over time and help lower your personal tax burden.
- Four savings accounts to consider having are the following:
- What are the main types of savings accounts?
- You can separate savings accounts into three broad categories. Each category offers different features and levels of access to your money.
- Savings accounts: These are the most basic type of accounts used to save money. The main difference between savings and checking accounts is their purpose. Checking accounts are intended to hold funds you need for everyday use while saving accounts are meant to secure your money safely for the future. Savings accounts can be goal-specific, like health savings accounts and college savings accounts.
- Money market accounts: Money market accounts are a hybrid between high-yield savings accounts and checking accounts. You get higher interest rates than a regular savings account, but some of the the liquidity of a checking account.
- Certificates of deposit: These accounts pay higher interest than savings accounts or money market accounts, but assess penalties for withdrawals before maturity. CDs are good options for long-term savings goals.
- You can separate savings accounts into three broad categories. Each category offers different features and levels of access to your money.
Daria Uhlig, John Csiszar and Jennifer Taylor contributed to the reporting for this article.
Information is accurate as of April 29, 2024.