Key takeaways
- High-yield savings accounts pay up to 4.20% APY (400x more than traditional savings accounts at 0.01%), making them the best choice for emergency funds and short-term savings goals.
- CDs lock your money for fixed terms (1 month to 5 years) in exchange for guaranteed rates, while money market accounts offer checking-like features (debit cards, checks) with savings-level interest.
- Tax-advantaged accounts (HSAs, IRAs, Roth IRAs) serve specific purposes — medical expenses, retirement — and shouldn’t be used for general emergency savings despite their benefits.
- Match your account choice to your timeline: high-yield savings for 0-2 years, CDs for 1-5 years when you won’t need the money, and retirement accounts for 10+ year goals.
Not all savings accounts are created equal. The difference between a traditional savings account (0.01% APY) and a high-yield savings account at an online bank (4.20% APY) is $419 in annual interest on a $10,000 balance. That’s a 419x difference.
Here’s exactly which account to use for each savings goal, what rates to expect and which trade-offs actually matter.
Quick comparison: 8 types of savings accounts
For most people’s primary savings, high-yield savings accounts offer the best combination of high interest, daily access and FDIC insurance. Consider using the other account types for specific purposes, not as your main emergency fund.
| Account type | Best for | Typical APY | Liquidity | FDIC insurance | Monthly fees |
| Traditional savings account | Convenience at your current bank | 0.01% | High (daily access) | Yes | Often $5-$12 (waivable) |
| High-yield savings account | Emergency funds, short-term goals | Up to 4.20% APY | High (daily access) | Yes | Usually $0 |
| Student savings accounts | Students under 18-24 | Up to 4.20% APY | High (daily access) | Yes | Usually $0 |
| CDs | Money you won’t need for 1-5+ years | Up to 4.25% APY | Low (early withdrawal penalty) | Yes | Usually $0 |
| Money market accounts | Hybrid checking-savings needs | Up to 4.25% APY | High (daily access) | Yes | Varies ($0-$15) |
| Cash management accounts | Brokerage cash, multi-bank spreading | Around 4.00% APY | High (daily access) | Often via partner banks | Usually $0 |
| Health Savings Accounts (HSA) | Medical expenses (requires HDHP) | Depends on investments | High (for medical only) | Varies by provider | Varies ($0-$5) |
| IRA/Roth IRA | Retirement (10+ years out) | Depends on investments | Low (early withdrawal penalty) | Varies by holdings | Varies by custodian |
1. Traditional savings account
What it is: The basic savings account offered by most banks and credit unions. You can deposit and withdraw money at any time, and it earns variable interest.
Current rates: Interest rates on traditional savings accounts are generally low compared with other savings products. The national average savings account yield is 0.61 annual percentage yield (APY), according to Bankrate data. Some big banks pay even less interest — 0.01 percent for a standard savings account at Chase, for example.
Traditional savings accounts are convenient if you already bank there, but they’re leaving money on the table. A $10,000 emergency fund earns $1 a year at Chase versus $420 a year in a high-yield savings account. That’s $419 you’re giving up annually for no good reason.
Monthly fees: $5-$12 at many traditional banks (often waived with minimum balance of $300-$1,000).
Accessibility: Daily access via transfers, ATM withdrawals, or in-branch withdrawals. Some banks still enforce 6-withdrawal-per-month limits, though this is no longer required by federal law.
When to use a traditional savings account:
- You want all your accounts at one bank for simplicity
- You frequently need in-branch cash deposits or withdrawals
- You’re older and uncomfortable with online-only banking
When NOT to use a traditional savings account:
- You want to actually grow your savings (use high-yield savings instead)
- You’re building an emergency fund (use high-yield savings instead)
- You’re saving for any goal where interest matters (use high-yield savings or CDs instead)
2. High-yield savings account
What it is: A savings account that pays significantly higher interest rates than traditional savings accounts, typically offered by online banks with lower overhead costs.
Current rates: High-yield savings accounts offer much better rates than traditional ones. The highest interest rates on savings accounts are hovering around 4%, whereas many traditional savings accounts only offer 0.01%. You can often find high-yield savings accounts online banks, because they don’t have the expenses of keeping brick-and-mortar branches, they pass those savings to their customers in the form of high rates.
Monthly fees: Usually $0 (most high-yield savings accounts have no monthly fees or minimum balance requirements).
Accessibility: Accessibility to your funds can be different, and sometimes worse, compared to traditional accounts. For example, many high-yield savings accounts (especially those offered by online banks) don’t allow cash deposits or only allow cash deposits for a fee. You may also be limited to moving funds only via wire or electronic transfers, as ATM withdrawals may not be available). But funds accessibility varies by bank. And you may find the trade-off of accessibility is worth it for the yield.
This should be your default savings account
Unless you have a specific reason to use one of the other account types, high-yield savings accounts offer the best combination of high interest, safety, and accessibility.
Compare Bankrate’s best high-yield savings accounts.
When to use a high-yield savings account:
- Emergency fund (this is the best place for it — period)
- Short-term savings goals (vacation, down payment, car purchase in 1-2 years)
- Any money you need to keep liquid but want to earn interest on
- Wedding fund, moving expenses, home repairs, irregular bills
Trade-offs to know about
- No cash deposits at most online banks (not an issue if you direct deposit your paycheck)
- 1-3 day transfer time to get money to checking (not instant, but fine for emergency funds)
- No physical branches if you prefer in-person banking
3. Student savings account
What it is: Savings accounts designed for young people (typically under age 18-25) with features tailored to students: no monthly fees, low or no minimum balance requirements, and sometimes financial education tools.
Current rates: Rates on student savings accounts tend to be low to middling. You can find better rates with regular high-yield savings accounts though if you’re under 18, you might have to open a joint checking account.
Monthly fees: Usually $0 while you’re a student (under age 24-25); may convert to a regular account with fees after you age out.
Student savings accounts are fine for teaching banking basics, but they pay lower rates than regular high-yield savings accounts. If you’re 16-17 and need a parent as joint owner, a student account makes sense. If you’re over 18 and can open accounts independently, go straight to a high-yield savings account instead. Compare checking and savings accounts for students.
When to use a student savings account:
- You’re under 18 and need a joint owner (parent/guardian)
- Your school or parents strongly prefer a specific bank
- You’re just learning to manage money and want simplicity
When to skip student savings accounts:
- You’re 18+ and can open a high-yield savings account independently
- You want to maximize interest earnings (high-yield pays 2-4x more)
- You’re comfortable with mobile banking
4. Certificates of deposit (CDs)
What they are: A certificate of deposit, or CD, is a type of savings account where you agree to leave your money with the bank for a set period in exchange for a fixed interest rate. CD terms range anywhere from one month to five years or longer. Early withdrawal from a CD comes with a penalty (typically 3-12 months of interest).
Current rates: CDs typically pay a higher yield than traditional savings accounts because of the agreement to lock up your money. Rates for most types of CDs are fixed, but they do vary widely across CD terms. As with high-yield savings accounts, online banks tend to offer the highest yields on CDs.
Monthly fees: Usually $0 (no monthly maintenance fees)
When to use CDs:
- You KNOW you won’t need the money for [X] months/years
- You’re saving for a specific date (wedding in 2 years, house down payment in 18 months)
- You want to lock in today’s rates (if you think rates will fall)
- You want to remove temptation to spend (illiquidity can be a feature, not a bug)
When NOT to use CDs:
- Emergency fund (you need instant access, not locked up for years)
- Money you might need soon (early withdrawal penalties hurt)
- When you think rates will rise significantly (you’ll be locked into lower rates)
Don’t assume longer CDs always pay more. In today’s rate environment (verify current), 1-year CDs often beat 5-year CDs because banks expect rates to fall. Do the math before committing.
Money tip:
If you want CD rates without the lock-up period, look for no-penalty CDs. They typically pay 0.25%-0.50% less than traditional CDs but let you withdraw anytime after 7 days without penalty.
5. Money market accounts (MMAs)
What they are: Money market accounts are similar to a savings account, though they often offer check-writing capabilities or a debit card for easier access to funds. Market money accounts tend to require higher minimum balances than other types of savings accounts, so consider the pros and cons of money market accounts before making a decision.
Current rates: Many of the best money market accounts are offering APYs of 4% or higher. MMAs used to pay higher rates than savings accounts, but that’s no longer true. Today’s competitive money market accounts and high-yield savings accounts pay essentially the same rates (4.00% APY). Many money market accounts advertise high APYs but require $10,000-$25,000 balances to earn those rates. Below the threshold, you might earn just 0.10%-0.50%. Always check the balance tiers before opening.
Fees: Whether the money market account has a monthly maintenance fee depends on the issuing bank.
Accessibility: Unlike most savings accounts, money market accounts often offer access to your funds via a debit card or paper check. Note though that some banks may impose limits on monthly withdrawals, just like with a savings account.
When to use a money market account:
- You want a hybrid account for both saving and occasional bill payments
- You need check-writing ability from your savings
- You maintain high balances and can meet minimum balance requirements for best rates
When NOT to use a money market account:
- You want the simplest account (high-yield savings is easier)
- You can’t maintain the minimum balance (you’ll pay monthly fees)
- You don’t need check-writing or debit card features
6. Cash management account
What they are: Cash management accounts are offered by non-bank financial institutions (brokerages like Fidelity, Schwab, Vanguard, or robo-advisors) that combine checking, savings, and investment account features. Once you deposit your money into a CMA, the brokerage spreads your deposits across multiple partner banks. This increases your FDIC coverage beyond $250,000. You can write checks, use a debit card, and transfer money like a checking account.
Current rates: 3.00%-4.00% APY (typically lower than high-yield savings accounts).
Fees: Usually $0
Accessibility: Because this type of account is designed for everyday transactions (paying bills, writing checks, etc.), a cash management account is unlikely to have withdrawal limits.
FDIC insurance: Yes, but through partner banks. Coverage can exceed $250,000 if your deposits are spread across multiple banks (check with your specific CMA provider).
When to use a cash management account:
- You have more than $250,000 to deposit (CMAs can spread it for enhanced FDIC coverage)
- You already use the brokerage for investing and want to consolidate
- You want checking-like features with better interest than regular checking
When NOT to use a cash management account:
- You want the absolute highest savings rates (high-yield savings beats CMAs by 0.30%-0.50%)
- You prefer simplicity (CMAs are more complex than regular savings accounts)
- You don’t use the brokerage for other services
7. Health savings account
What it is: Tax-advantaged savings account for medical expenses. You must be enrolled in a high-deductible health plan (HDHP) to qualify. There are contribution limits to this tax-advantaged account but unspent account funds roll over year after year for future health care expenses. Since an HSA can only be used to pay for health care and you must have an HDHP to qualify, it is not a good savings account for everyone.
The real value of health savings account is the triple tax advantages: Tax-deductible contributions (reduce your taxable income now), tax-free growth (no taxes on interest or investment gains), and tax-free withdrawals for qualified medical expenses.
To use an HSA, you’d contribute pre-tax dollars (or deduct contributions on your tax return), spend on qualified medical expenses tax-free at any time and invest the balance if your account allows (think of it as a medical IRA). Your money roll over year after year (not use-it-or-lose-it like FSAs). After age 65, you can withdraw for any purpose (taxed as income, but no penalty).
Current rates: The APY on HSAs is usually lower than high-yield savings accounts but one feature of HSAs is that you can also invest your funds in stocks, bonds, ETFs and other securities if your account allows it. If you elect to invest your money, the returns will follow that of your chosen investments.
Fees: Some HSAs do not charge a monthly fee, while others do (though some institutions waive them if the HSA is offered through an employer.)
Accessibility: You can withdraw funds from your HSA at any time to pay for qualified medical expenses. If you withdraw funds for other purposes, that money is subject to a 20 percent penalty. (This rule does not apply if you are disabled or over age 65.)
When to use an HSA:
- You have a high-deductible health plan (required to open an HSA)
- You want to save for medical expenses with tax advantages
- You’re treating it as a stealth retirement account (max it out, invest it, pay medical expenses out-of-pocket, let the HSA grow tax-free)
When NOT to use an HSA:
- You don’t have an HDHP (you’re not eligible)
- You need the money for non-medical expenses (20% penalty before 65)
- You want the highest interest rate on liquid cash (high-yield savings pays more)
8. Individual retirement accounts (IRAs and Roth IRAs)
What they are: Tax-advantaged investment accounts designed for retirement savings. There are contribution limits for each account. For 2025, for example, you can contribute up to $7,500 to these accounts in 2026, or $8,600 if you are age 50 or older. The difference between a Roth IRA and a traditional IRA is in the taxation. A Roth IRA allows you to contribute after-tax dollars, and funds can be withdrawn tax-free after you turn 59½ years old. A traditional IRA allows you to contribute pre-tax dollars, which are taxed as income when you withdraw them after you turn 59½.
Rates: IRAs are investment accounts, not savings accounts. Returns depend on what you invest in (stocks, bonds, mutual funds, CDs, etc.).
Fees: Varies by custodian ($0-$50/year for account maintenance, plus investment fees)
Accessibility: Plan to keep all contributions to your IRA or Roth in the account until you retire, or you turn 59½. If you withdraw funds from your traditional IRA early, they are subject to both income tax and a 10% penalty. However, you can withdraw your contributions from a Roth IRA at any time, but not the earnings.
When to use IRAs/Roth IRAs:
- Long-term retirement savings (10+ years until you need the money)
- You’ve maxed out your 401(k) match and want more tax-advantaged space
- You want tax-free growth on investments
When NOT to use IRAs/Roth IRAs:
- Emergency fund (penalties and taxes on early withdrawal)
- Short-term savings goals (money is locked up until 59½ for full benefits)
- Money you might need in the next 5-10 years
What to consider when choosing a savings account
The type of savings account you choose should help you achieve your savings goals. As you explore your savings options, think about your needs. Do you value security and liquidity? Or do you want the highest return, even if you have to sacrifice access to your funds? Or are you looking to use your contributions to optimize your taxes?
Be honest with yourself about the amount you can afford to put in savings. Start by building an emergency fund that you can access easily. Then, work toward other savings goals with the account that best suits your needs.
Next steps
Frequently asked questions about savings accounts
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