Savings accounts are one of the most common types of bank accounts -- and potentially one of the most valuable. Why? Because they let you earn interest on your savings just for leaving your money in the account. But choosing the best one for you isn't always easy because there are so many options out there. This guide will walk you through the types of accounts and how to choose a savings account that's right for you.
Types of savings accounts
Here are some common account types to consider when looking for a place for your savings:
- Basic: These tend to have few or no requirements for minimum daily balance. And they're available with just about any brick-and-mortar bank or credit union. But their annual percentage yields (APYs) usually aren't as high as they are with some of the other account types.
- High-interest: This is also known as a high yield savings account. It offers an APY that's much higher than a basic savings account's rate. That lets customers grow their savings more quickly. These are usually more common with online banks, though some brick-and-mortar banks may offer them to customers who maintain a certain minimum balance.
- Jumbo: These accounts are designed for people with high net worth. These usually require a minimum deposit of at least $100,000 and offer higher APYs than most other types of savings accounts.
- Money market accounts: A money market account is technically a separate type of deposit account. It's a hybrid between a savings and a checking account. They often get lumped in with savings accounts because their features are pretty similar. Money market accounts tend to offer similar APYs as savings accounts, but they give you more options for withdrawing your cash, including a debit card and check-writing capabilities at some banks.
- Online accounts: This option can be any of the account types listed above. What sets them apart is that they're offered by a bank that doesn't have any physical branches. This reduces the bank's operating costs and lets them charge customers fewer fees and offer higher APYs.
Things to consider when choosing a savings account
When choosing the right option for you, keep the following things in mind:
- Fees: Check if your account has a monthly maintenance fee. If it does, see if you can get it waived. Get a copy of the account's fee schedule and look at what your bank could charge you for. Make sure you're comfortable with these before applying for the account.
- APY: A higher interest rate means more money for you. So this is one of the most important features to keep in mind when comparing your options. But don't get too hung up on which account offers the best rate. Banks can change their rates at any time, so what might be the account with the highest rate right now could end up in the middle of the pack in a couple of months. Just focus on choosing a rate that's close to the best available.
- Convenience: Both brick-and-mortar and online banks offer online and mobile banking tools these days. But some may be more user-friendly than others. You can also get in-person support at brick-and-mortar banks if you need to, which some people prefer.
- Other accounts: If you like to do all of your banking in one place, look into what other bank accounts are available at your chosen financial institution. That includes checking accounts, loans, and credit cards. Some banks also give additional benefits to customers who open multiple accounts, so this could help sway your decision if you're on the fence.
Get the best savings account for you
Savings accounts are a useful way to grow your wealth while keeping your funds easily accessible. They're also helpful for growing an emergency fund so you're prepared for unexpected expenses. If you're not sure how to choose a savings account, use the above information to help narrow down your options. You can also check out The Ascent's picks for the best savings accounts if you'd like to save yourself some time.