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Three Types of Savings Accounts and How to Use Them

a piggy bank symbolizes the importance of choosing the best saving account for you

Saving money is something that most of us probably wish we were better at. And sometimes, it feels like life gets in the way. By the time we’ve paid our monthly bills, paid for groceries, and spent a little bit of money on the “fun” stuff, it often feels like there isn’t much left over. But learning about three different types of savings accounts can help you establish a solid money-saving strategy.
At Academy Bank, we’re proud to offer three different types of savings accounts: traditional savings accounts, money market accounts, and certificates of deposit (CDs). Keep reading to learn more about each one, as well as any considerations you’ll need to keep in mind when choosing that account type.

Savings Accounts

Most people have some level of familiarity with savings accounts. That’s because they’re exactly what they sound like -- an account that lets you securely set your money aside for safekeeping. In a savings account, you can earn interest by leaving your money in the account.

Unlike a checking account, a savings account isn’t typically linked to a method of payment such as a debit card or checkbook. However, you can often link your savings account and checking account to help provide you with overdraft protection. That way, if your checking account balance gets low, you can make an automatic transfer from savings to checking. This can save you money in overdraft fees.

The idea behind savings accounts is to touch your money as little as possible and allow your savings to grow. You can use the funds from your savings account when you need it, but you should do so sparingly.

Money Market Accounts

The next type of savings account to be aware of are money market accounts. Money market accounts are actually quite similar to both savings and checking accounts, so for some people, money market accounts give the best of both worlds.

Just like a savings account, money market accounts earn interest. But like a checking account, you will likely have the option to get a debit card and/or a checkbook. This means that a money market account can give you easier access to your funds than a savings account can.

The main benefit of a money market account for savings -- besides being easier to access -- is that it often earns higher interest than a traditional savings account. However, money market accounts may have higher balance requirements in order to earn that higher interest rate.

Certificates of Deposit (CDs)

The last type of account we’ll mention today that works well for savings is a Certificate of Deposit, which is sometimes called a CD. CDs are somewhat similar to a money market account. That’s because they both have a minimum deposit or a balance requirement.

But the thing that makes CDs unique is that they have a maturity date. That means you have to leave your funds alone in the account until a certain date, at which point the CD is considered “mature.” If you don’t, you’ll have to pay a penalty for early withdrawal. Typically, maturity dates for CDs range between three months and five years. The longer your money stays in the CD, the more interest you’ll be able to earn.

In fact, CDs often pay higher interest rates than the other two types of savings accounts. That’s because you’re committing to leaving your money in the CD for a set period of time -- you’re essentially allowing the bank the option to borrow your money during the time your money is in the CD. The tradeoff is higher interest for you, but also restricted access to your money.

Certificates of Deposit can be the right choice for people who want to earn some interest on their savings in a low risk way. But they’re best when you don’t need immediate access to those funds.

What to Keep in Mind About All Three Account Types

Savings accounts, money market accounts, and CDs all have a few things in common. Each pays interest, but the amount depends on a few different factors. And one important fact about all three account types is that they are all insured by the Federal Deposit Insurance Corporation, or FDIC, up to the maximum amount allowed by law. That means there’s relatively low risk when it comes to saving your money in any of these account types.

But when you’re looking at which account type is right for you, keep this in mind: there’s no need to choose just one. You can have all three types of accounts open at the same time. Depending on your personal situation, having your money saved in multiple types of savings vehicles could be a useful strategy that helps you achieve your financial goals.

Get Started Saving With Academy Bank

Academy Bank is working hard to be your go-to partner when it comes to your financial goals. We’re happy to answer your questions about different savings account types, and we’ll even help you set up the account(s) that’s right for you.


Learn more about Academy Bank’s savings account options.


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