A savings account not only allows you to save and store money but also helps you earn interest quarterly or monthly based on how your bank works. There are a range of savings accounts one can choose from. Let’s take a look at the different types of savings accounts out there.
Introduction
Saving money is non-negotiable to achieve and maintain financial stability and growth. That’s why it’s essential to choose the right savings account, one that maximizes your savings potential. Understanding all the features, benefits, and limitations of each savings account is crucial, as it will help you make an informed decision.
11 Types of Savings Accounts
This blog will explore the many types of savings accounts available worldwide. From traditional savings accounts to more specialized options like high-yield savings accounts and money market accounts, we will explore them all.
Traditional or regular savings accounts
A traditional savings account is the most common and easy-to-use savings account that you can sign up for if you are new to savings. This type of account offers fair and modest interest rates. Plus, your funds are safe and can be accessed easily with the bank’s app. It’s a convenient option for everyday use. You can even pay bills and pay for food through regular savings accounts.
High-yield savings account
A high-yield savings account offers significantly higher interest rates than a traditional one. These are usually offered by online banks or credit unions, and you can apply for one if you want to earn more money through interest. Remember, choosing the best HYSA involves considering critical factors like interest rates, fees, minimum balance, and accessibility. Beem is an excellent guide to help you find the best high-yield savings accounts for your needs.
Money market account
This may sound complicated, but money market accounts merge savings and checking accounts. They provide higher interest rates than traditional savings accounts, allowing only a handful of check writing and debit card usage. The main drawback of this account is that you need to adhere to a higher minimum balance.
CD account
In a Certificate of Deposits (CD), you will be offered a fixed interest rate for a specified term that could range from a few months to two or more years. In exchange for these higher interest rates, you promise the bank that you will leave your money in your account without withdrawing it until your CD matures. And if you withdraw it before it matures, you will face a penalty.
Cash management account
Banks don’t usually offer cash management accounts. You need to enquire about these from brokerage firms and financial service companies. Cash management accounts possess features of savings and checking accounts while offering competitive interest rates, check writing, and debit card access. These accounts provide flexibility and higher liquidity compared to traditional savings accounts.
Specialty savings account
Specialty savings accounts are designed for special occasions. If you are saving money to go on a vacation, then a holiday savings account is the one to go for. Furthermore, these accounts offer extra features such as goal tracking and automatic transfers.
Online savings account
Online banks offer online savings accounts and typically provide higher interest rates owing to lower overhead costs. These accounts can only be accessed online, offering convenient online and mobile banking features. It’s an easy way to manage your savings from anywhere.
Student savings account
This type of savings account is only available for students. There are no minimum fee requirements and no monthly fees, either. It’s a great way for young children to learn about the importance of financial stability, savings, and growth.
Savings account with automatic savings features
Savings accounts with automatic savings features transfer money regularly from checking to savings accounts. You can set it up for weekly or monthly transfers based on income. This type of account will help you build your savings effortlessly and consistently, even if you fail to do so.
Health savings account
A Health Savings Account (HSA) is designed for people who have high-deductible health plans. When you credit any money to your HSA account, it is usually taxable. However, the money is tax-free if you withdraw it for health-related purposes. In addition, HSAs also offer their customers the ability to save money in their accounts without paying any tax.
IRA and Roth IRA
Individual Retirement Accounts (IRA) and Roth IRAs are carefully and specially designed for both those planning to retire and those already retired. They are both tax-free on after-tax contributions. IRAs are attractive accounts for those planning to retire with some money saved up for the future.
Conclusion
Choosing from the many types of savings accounts might seem like a cumbersome process, but all it takes is some research and financial guidance. Having a savings account is essential as it reflects your financial stability. It will also help you when you need emergency funding. Whether you are looking for higher interest rates, specific savings goals, or tax advantages, there is a savings account suited to your every need.
Remember, healthy financial practices go a long way. And with a guide like Beem, you can even get rewarded for good financial behavior. Unlock extra cash by making on-time payments, avoiding overdrafts and payment failures, and more with Beem’s expert assistance.
FAQs
Which type of savings account is the best?
Determining which savings account is the best depends on your needs and wants. Some general factors to consider include interest rates, access to your money, minimum balance requirements, and for which occasion you are trying to save money.
Which is the safest bank for savings accounts?
Before you select any bank, thoroughly research its credibility. After all, it’s your hard-earned money. Look for a reputed bank and read their reviews on the internet. Also, look for FDIC-insured banks in America or their equivalent if you live in any other country.
Which bank gives 7% interest on savings accounts?
Interest rates on savings accounts are usually lower. So, any bank that offers a 7% interest rate will be a little challenging to find, especially in today’s economic times. Always be cautious of any hoax offers you hear or read online. Always research before handing your money to online or offline banks.
