There are many different savings accounts, and each works a little differently. Knowing the best one for your needs can make it easier to grow your money and reach your financial goals.
The three most common savings accounts are regular deposit, money market, and certificate of deposit (CD) accounts. They each offer different features and interest rates.
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Basic Savings Accounts
Basic savings accounts are designed to hold the money you don’t plan to spend immediately, such as your emergency fund or a down payment on a home. These accounts are less expensive than traditional checking accounts and tend to earn higher interest rates.
Banks and credit unions offer different types of savings accounts. Still, all have one thing in common: they allow you to set aside money for a specific purpose or goal. Examples include Christmas savings, business savings, and education savings accounts.
These accounts are typically free to open or no deposit savings accounts, and you don’t have to worry about fees or minimum balance requirements. But you should review and compare interest rates, monthly service charges, and other considerations before deciding which account is best for you.
High-Interest Savings Accounts
Savings accounts offer a way to deposit money and earn interest on it. They also allow you to build savings by compounding your interest over time.
You can find high-interest savings accounts online and at brick-and-mortar banks and credit unions. Many of these accounts pay several times more than the national average of 0.07% APY, according to the Federal Deposit Insurance Corporation (FDIC).
Keeping your money safe and earning a good rate are reasons to open a high-interest savings account. But you have to choose wisely.
Consider factors like minimum deposit requirements, APYs, and monthly maintenance fees when comparing high-yield savings accounts. It’s also good to check whether the institution is federally insured.
Joint Savings Accounts
A joint savings account is an excellent option for couples and domestic partners who want to pool their finances and save toward mutual goals. They can also be useful for parents or business partners who wish to share financial responsibilities.
Unlike single accounts, joint bank accounts allow multiple owners to deposit and withdraw money. In addition, all account holders can get a debit card, write checks and make purchases.
Many people open a joint savings account because it helps them meet minimum account requirements more easily and access benefits like higher savings interest rates or waived fees. But it’s important to understand the perks and downsides before opening a joint account.
Joint savings accounts have a few pitfalls, including shared liability and lack of privacy. Additionally, other account holders may be held liable if one person mismanages the funds in the account. And if a joint account owner dies, the surviving partner may receive fewer benefits.
Reward Savings Accounts
If you’re looking for a savings account that offers more incentives for saving, a rewards savings account might be what you’re after. These accounts usually come with competitive rates and a one-time cash bonus for opening the account. In addition, you can get a dividend each year when you maintain a certain minimum balance.
These accounts are only for some, but they can be a good way to encourage people to save regularly. For example, America First Credit Union offers a rewards savings account that allows you to win $1,000 monthly, $10,000 quarterly, or $50,000 annually for just maintaining a $500 average balance.
These savings accounts can be opened at traditional banks and credit unions. Still, they also are available from online banks. Many online banks have low overhead costs and can pass those savings on to customers. As a result, they typically offer higher rates and lower fees than traditional banks or credit unions.