Which Type of Savings Account is Right for You?

Saving money is a crucial step toward building financial security –– but many people aren’t saving enough, if at all. According to June 2025 estimates by the U.S. Department of Commerce, Americans are setting aside less than 5% of their disposable income each month on average.¹ With rising expenses and financial uncertainty, making the most of every dollar saved is more important than ever.

Choosing the right savings account can help you set yourself up for success. We’ve broken down the various options to help you find the one that best fits your goals, budget and lifestyle.

5 different types of savings accounts

When choosing a savings account, it’s important to weigh its features against your particular financial goals, your day-to-day money habits and the style of saving that could work best for you.

1. Traditional savings account

Traditional savings accounts are widely available at banks and credit unions and offer a secure, accessible place to store and grow your money. They often have low or no minimum balance requirements, making them a practical option for building emergency savings or working toward short-term goals. However, they can’t replace checking accounts, as some banks impose transaction limits or fees on savings accounts. Deposits are insured up to $250,000 per depositor, per institution, through the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA), adding an extra layer of protection in case the bank or credit union fails.²

Although interest rates on these traditional savings accounts are generally lower than other savings options, their flexibility and security make them a solid starting point for many savers.

2. Money market account

Money market accounts are like traditional savings accounts but come with a few extra features. Money market accounts usually offer higher interest rates than traditional savings accounts. However, these interest rates are variable, which means they can go up or down depending on changes in the economy.

Many money market accounts let you write checks or use a debit card to access the savings, making them a good choice for an emergency fund. Just keep in mind that most of them require a higher minimum deposit and balance to open the account and keep it open or avoid fees. Like other savings accounts, money market accounts are insured by the FDIC or NCUA for up to $250,000 per depositor, per institution. Also, some banks may limit how many times you can take money out each month without charging a fee.³

3. Certificate of Deposit

A Certificate of Deposit (CD) is a type of savings tool where you agree to keep your money in the account for a fixed amount of time called the term. The term can range from a few months to several years, during which you usually can’t take the money out without paying a penalty. CDs are also insured by the FDIC or NCUA for up to $250,000 per depositor, per institution.

CDs may offer higher interest rates than other savings accounts, especially if you deposit more money or choose a longer term. When the CD reaches its maturity date — the end of the term — you can take out the money you put in, plus the interest it earned.⁴ CDs are a good option if you won’t need to use the money right away and want a guaranteed return.

4. High-yield savings account

High-yield savings accounts (HYSA) are a great option if you want to earn more interest than with a traditional savings account. These accounts are usually offered by online-only banks, which can afford to pay higher rates because they don’t have the costs of running physical branches. While the national Average Percentage Yield (APY) savings rate was around 0.41% as of August 2025, some high-yield accounts may offer rates over 4% APY. However, the APY offered can change over time based on decisions made by the Federal Reserve.⁵

One of the main benefits of a HYSA is that you can withdraw your money at any time without penalty. That said, some banks may require a minimum deposit to open the account, and others may ask you to maintain a certain balance or set up direct deposit to continue earning the highest interest rate.⁶

5. Cash management account

Cash management accounts are offered by a variety of financial institutions, including investment companies and brokerage firms. These accounts combine the features of checking, savings and brokerage accounts. People may choose cash management accounts if they have a very large amount of cash to deposit.

Cash management accounts use a financial process called "sweeping" to distribute your deposits across multiple FDIC-insured banks, so all your cash is protected. Many cash management accounts also connect to your investment accounts, so you can easily move funds across investments.⁷

Savings account types at-a-glance

Traditional savings account

Pros

• Low or no cost to open
• Typically up to six transactions per month with no penalty
• Can link directly with a checking account

Cons

• Lower interest rates
• Potential for monthly fees
• May have minimum balance or other requirements

Money Market Account

Pros

• Higher interest rates than regular savings accounts
• Access to funds via check and debit card
• Typically up to six transactions per month with no penalty

Cons

• Higher opening and minimum balance requirements than regular savings accounts
• Potential for monthly fees
• Interest rate can fluctuate

Certificate of Deposit (CD)

Pros

• Fixed interest rates for a set term
• Low-risk savings option
• Multiple term options available

Cons

• Money is not easily accessible during the term
• Early withdrawal penalties
• Interest earnings may not keep up with inflation

High-Yield Savings Account

Pros

• Some of the highest interest rates available with a savings account
• Low fees
• Interest often compounds daily

Cons

• Usually no physical branches
• May have additional requirements, such as minimum balances, to keep high-yield APY

Cash Management Account

Pros

• Competitive interest rates
• Convenient access to funds
• Potential investment opportunities

Cons

• Limited in-person banking options
• Restricted banking services
• May not offer in-person support

How to choose the best savings account for you

Choosing the right savings account depends on how you manage your money, how much cash you need to deposit and what you’re saving for. Start by thinking about how often you’ll need to use the money. Are you building an emergency fund you might need to access quickly? Or are you saving for something long-term, like a car or a house?

Next, think about what matters most to you. Do you want a higher interest rate, or is it more important to have easy access to your money? Some accounts, like high-yield savings accounts or CDs, can earn you more interest but may limit how often you can take money out. Others, like traditional savings or money market accounts, are easier to use but may offer lower interest rates.

Also, check if the account has fees, a minimum balance requirement, or if it needs to be managed online. Some accounts offer great rates but only if you meet certain rules.

By thinking through your needs and comparing your options, you can find a savings account that works best for you.

Save your way

There’s no one-size-fits-all answer when it comes to choosing a savings account. From the easy access of traditional savings accounts to the higher returns of high-yield and certificate of deposit options, the right account for you depends on your financial goals, how often you need to access your money, and what features matter most to you.

Take time to compare your options, understand the terms and choose an account that supports the way you save. And you don’t have to choose just one. If you have several different goals, you can open the right kind of account for each one. Whether you're building an emergency fund, saving for a big purchase, or simply looking for a safe place to grow your money, there’s a savings account out there that fits your needs.

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Sources:

1. “Personal Income and Outlays, June 2025 https://www.bea.gov/news/2025/personal-income-and-outlays-june-2025
   
2. “How Does a Traditional Savings Account Work?” SmartAsset. (Accessed April 23, 2025) https://smartasset.com/checking-account/how-does-a-traditional-savings-account-work
   
3. “Money Market Account.” Investopedia.com. (Accessed April 23, 2025) http://www.investopedia.com/terms/m/moneymarketaccount.asp?lgl=myfinance-layout
   
4. "What Is a Certificate of Deposit (CD) and What Can It Do for You?" Investopedia.com. (Accessed April 23, 2025) https://www.investopedia.com/terms/c/certificateofdeposit.asp
   
5. “National Rates and Rate Caps.” FDIC. (Accessed April 23, 2025) https://www.fdic.gov/national-rates-and-rate-caps
   
6. “High-Yield Savings Accounts: What They Are and How They Work.” NerdWallet. (Accessed April 23, 2025) https://www.nerdwallet.com/article/banking/high-interest-savings-account
   
7. “What Is a Cash Management Account?” Bankrate. (Accessed April 23, 2025) https://www.bankrate.com/banking/what-is-a-cash-management-account/
   

This article has been updated from previous postings in 2017 and 2022. Matt Diehl and Kim Gallagher contributed.