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Types of Savings Accounts

Savings accounts are one of the most important financial tools you have to build wealth and plan for unexpected emergencies. Using them allows you to save money for big goals, like down payments on a home, retirement, or a family vacation. At the same time, having money in savings means that when a car breaks down, or you need to call the plumber for an emergency repair, you can do so without having to use credit.

Savings accounts build value by applying an interest rate to the money you maintain within the account. Yet, not all accounts are the same. There are various types of savings accounts available, each with different features to offer you. Choosing the right savings account will allow you to maximize your earning potential, keep costs low, and provide you with all the necessary features. Let’s explore the pros and cons associated with the different types of savings accounts available today.

Traditional Savings Accounts

A traditional savings account is one of the most common types of savings accounts available. They are simply accounts for you to put money into to earn interest. Many of them have very basic features, including limited interest from them. They can be seen as an effective but overall basic savings tool.

Most of the time, traditional savings accounts do not have a minimum balance requirement. That means that since there is no minimum, they can be a good option for those who are just starting to save or those who do not plan to put a lot of money into this account. In addition to this, they are very accessible, often connected directly to your checking account and accessible through ATMs and debit cards.

As with most types of savings accounts, as long as you choose an affiliated organization, these accounts are FDIC or NCUA-insured. For bank accounts, FDIC coverage applies, and for credit unions, NCUA (National Credit Union Administration) insurance applies. In both cases, these insurance products help to protect your balance up to $250,000 per depositor per account. That means your deposited funds are safe.

High-Yield Savings Accounts

As we look at the best types of savings accounts for those who plan to put aside even more money, the focus is typically on the interest the account can earn. A high yield savings account is specifically designed to pay a higher interest rate, allowing you to earn more on the money you put into it. The savings potential here is much higher, allowing you to accelerate your financial growth.

Keep in mind, though, that high-yield savings accounts typically have higher interest rates and may have higher fees associated with them, including maintenance fees (though some are still free to use). However, they tend to have minimum deposit requirements. That means you may have to keep a specific balance in the account to maintain the high interest rate. Some may also have withdrawal restrictions that limit the number of transactions or the total amount you can withdraw within a specific amount of time.

Money Market Accounts

Money market accounts are similar to savings accounts, but do not carry the same FDIC or NCUA protection. A money market account makes it easier for you to obtain your money when you need to. Unlike high-yield savings accounts, money market accounts typically have fewer transfer limits, allowing you to use them more readily.

Money market accounts typically have a higher interest rate when compared to traditional savings accounts. They typically also have higher minimum balance requirements. Some may have withdrawal restrictions that apply to your account as well.

Share Certificates

A share certificate is a type of savings tool that operates a bit more like an investment. With these tools, you deposit money into the account, and it remains there for a set amount of time. As long as you keep the funds there, it will earn a fixed rate of interest. Typically, share certificates like this have a higher interest rate than traditional savings accounts, though rates range based on the length of the term and the financial institution.

It is also important to note that share certificates can be a good thing for those creating long-term savings goals because they earn more over time. However, there are penalties on them when you need to withdraw the money early, which can be hard in situations where you need to have fast access to your savings account funds. Also note that most share certificates require you to deposit a specific amount for the term, which means they sometimes have a higher minimum deposit requirement.

Individual Retirement Accounts (IRAs)

While considering the best savings account types, knowing your goals is critical. For example, what are the different types of savings accounts for retirement planning? These are different from your average savings account, like those listed above, because they provide a way to put money aside specifically for retirement. In doing so – and using a recognized method – you benefit from tax advantages provided by the IRS. An Individual Retirement Account (IRA) is one way to do this.

An IRA is a specialized savings account designed specifically to help individuals save for retirement. The goal of these accounts is to put money into them that you will not need to use for years to come – even decades – until you are ready to retire. In doing so, the IRS offers some tax benefits, including allowing you to choose between a tax-deferred or tax-free growth model, depending on which works for your needs.

Traditional IRAs are one of the options available to you. These are tax-deferred accounts. That means that you put money into these accounts before income taxes are levied on them. For example, the money heading into these accounts is money that you are not paying income taxes on through your paycheck. The money will remain in the traditional IRA for some time, growing in value. When you are ready to withdraw the funds, you then pay taxes on the amount you withdraw.

Traditional IRAs offer a number of benefits. One of those benefits is that the contributions you make to fund the account are tax deductible. That means they help to lower your tax liability for the year (and that means savings)! Additionally, many people will pay taxes at a higher rate now, during their working years, than they will once they retire. That means you may pay less on the funds later in life.

A Roth IRA is a bit different. The money put into these accounts is already taxed as income. That means you have already paid income taxes on it or will in the near future. The money goes into this tax-advantaged retirement account and grows without taxes levied against it. You do not pay taxes on these funds once you start to withdraw them.

The IRS has contribution limits (the amount you can deposit each year) as well as income eligibility requirements. These limitations will change from year to year and are updated by the IRS. Also, note that IRAs may have some fees associated with them to open and maintain them. If you pull money out of a traditional IRA early, you could also pay taxes on those funds and a penalty on top of it.

All IRAs carry some risk. There is no specific fixed earning amount. Rather, the possible earnings depend on how the underlying securities perform. Market fluctuations can play a role in how much you will earn over time.

Specialty Savings Accounts

What types of savings accounts should I have? This is a common question many people ask because there are numerous other types of accounts out there, and finding the right type for your needs is not always straightforward. There are numerous specialty savings accounts that ultimately have a specific goal or objective in mind. Some examples include:

  • Corporation accounts: These are a type of savings account designed more for business use.
  • Health Savings Accounts (HSA): This type of account is a tax-advantaged account that allows you to put money aside to use for qualified medical expenses.
  • Sole proprietorship accounts: These accounts are separate bank accounts designed for those who operate their own small business.
  • Estate accounts: Estate accounts are meant to create a way to manage a specific estate.

Using a specialized savings account allows you to plan for specific financial goals. It may allow you to achieve various objectives or just aid in keeping funds separate from your personal expenses.

All savings accounts have some risk and eligibility requirements. When you contact our team to discuss these other types of savings accounts, we can offer clarity on how well they work for your needs.


Which savings account is best for short-term goals?

A traditional savings account is the lowest-fee option, but the higher the interest rate, the better.

What types of savings accounts are suitable for long-term savings?

For long-term savings, consider IRAs, which allow you to put money aside specifically for your retirement goals.

Is a savings account considered an asset on financial statements?

Yes, savings accounts are assets. The money is less liquid and accessible than a checking account, but is typically still readily available for you.

How do high-yield savings accounts differ from traditional savings accounts?

High-yield savings accounts typically have a larger minimum deposit requirement, but pay a significantly higher interest rate than traditional savings accounts.

What factors should I consider when choosing between a traditional savings account and a money market account?

The key here is how easily you want to access your money (money market accounts are very accessible) as well as your desire to have FDIC or NCUA protections.

Can I open multiple savings accounts for different financial goals?

Yes, you can have multiple savings accounts within the same financial institution or across several.

Final Thoughts

What are the types of savings accounts best suited for you? Compare these account options to your financial goals, and choose based on factors like ease of access, costs, and earning potential. At HFS FCU, we offer a range of savings accounts you can select from to meet the needs of diverse members. Contact us to learn more about what we can do for you.