Saving Everything You Need to Know About Saving Accounts

Need a savings account but don’t know where to start? Here’s a primer on the key features and benefits of savings accounts.

By Wendy Coop Illustration by An Chen
PUBLISHED 01/20/2023 | 9

Only 35% of households earning less than $50,000 a year said they feel secure with their level of savings, a 2021 survey by Bankrate revealed.

Add to that another 36% of Americans who feel they don’t have enough cash to cover a $400 emergency like a car repair or medical bill, as reported by the Federal Reserve, and it becomes apparent that many Americans struggle with saving money. While there are multiple ways to combat this financial insecurity, a savings account is a great place to start. Why? It allows you to deposit money for safekeeping while also earning you interest on the balance. 

But if you’re new to the savings world and have never opened an account before, you may be wondering where to start or trying to figure out which account to choose from the many options. 

Read on for a quick explainer on all things savings accounts. 

What Is a Savings Account?

Put simply, a savings account is an account that you open with a financial institution (brick-and-mortar or online) where you deposit and save money over time. What’s more, the financial institution offers an interest rate to hold your money in this account, which effectively grows your money.

A savings account is meant to be left alone: If you need regular access to your money or make frequent withdrawals, consider keeping your money in a checking account instead, as many banks charge a fee if you go above a certain number of withdrawals each month.

What Are the Types of Savings Accounts?

There are four main types of savings accounts: a regular savings account that typically earns small interest and gives you quick access to your funds; a high yield savings account that earns higher interest than a regular account; a money market account that earns higher interest, can come with a debit card and provides ATM access; and a certificate of deposit that holds a fixed amount of money for a fixed amount of time and earns higher interest but limits access to funds. 

Let’s dive into each one.

Regular Savings Accounts

Regular savings accounts are the most common and are widely available at banks and credit unions. Though these accounts earn interest, the rate is often very low. Typical interest rates may start as low as 0.01% annual percentage yield (APY). This means if you have $1,000 sitting in your savings account, your money will make you $0.10 after one year. 

The upside is ease of access to your money, making the regular savings account a popular choice for emergency savings. Still, some require your account balance to be at a certain amount at all times or they’ll charge you monthly maintenance fees. These accounts can usually be opened both in person and online.

High Yield Savings Accounts

High yield savings accounts are typically used for emergency funds or any funds you want to grow for a large purchase within the next five years, such as a car or down payment for a home. APYs are usually higher than the national average of a regular savings account but not as high as you may get with a CD. Like most regular savings accounts, interest rates are variable and can fluctuate at any time. 

Using this account can help you get to your savings goals faster. High yield savings accounts can come with no additional costs or minimum balance requirements; those with the best rates and terms are generally found online, meaning less access to a brick-and-mortar branch. Moreover, you can usually transfer money between your high yield savings account and other bank accounts, though it may take 24 to 48 hours.

Money Market Accounts

Money markets typically offer a higher interest rate than a regular savings account, but access to your money may be more limited. The accounts often come with ATM access, a debit card or check writing privileges for transferring funds from one bank account to another. But institutions may require a higher balance than regular savings accounts to open a money market account and typically limit withdrawals to a few times per month (depending on the bank).

The APY for money market accounts can range from 0.80% to 0.90%. This means your $1,000 would earn $8 to $9 in that first year, making it a better choice for saving money you don’t need regular access to. These accounts are usually accessed online but can also be accessed in person, through an ATM or by mail.

Certificates of Deposit 

Certificates of deposit, or CDs, offer fixed rates that are generally higher but put your money on hold with the financial institution for a set period, ranging from six months to five years. You cannot access the funds during this term, but if you are willing to commit to a longer term, you can often lock in a higher APY. Additionally, many CDs require a minimum deposit—though in some cases you can open one online with any amount.

Interest rates for CDs can start at 1.40% (as of June 2022) and go as high as 2.60%. At 2.60% interest, $1,000 deposited would be worth an extra $26 after one year and $137 after five years when the interest is compounded yearly. Again, the higher interest rate is a great incentive for depositing your money for a longer period of time. CDs can be opened in person or online and are best for higher interest guaranteed on money you won’t need in the short term.  

How to Open an Account and What You’ll Need 

In general, opening a savings account can be a quick and easy process, usually 15 to 20 minutes from start to finish, and you can often open it from the comfort of your own home—through the phone or online. Some banks may require you to visit a branch to open a CD or money market account. 

Before starting the process, here’s what you’ll need for your application: a government-issued ID, Social Security number or taxpayer identification number, date of birth, address, contact information and any checking account information if you want to link the accounts. 

For the most part, anyone can open a savings account, though if the person is under 18, they may need a parent or legal guardian to cosign. 

Bottom Line

Regardless of which account you choose, be sure to read the terms and conditions and shop multiple institutions for the best rates. Moreover, ensure you know the account’s minimum balance to open (if any), whether it allows for continuous deposits or withdrawals over time and the fees associated with each. To choose the best account for your needs, decide what the purpose of your savings will be, when you’ll need the money and how often you’ll need access to it. Happy saving!

Millie content is licensed from Meredith Corporation, publisher of Millie, Real Simple, InStyle and more.

Wendy Coop is a writer, certified financial education instructor, former naval officer and an entrepreneur. She is the author of “Budgeting for Women” and the CEO of Coop Creative Consulting LLC, where she teaches people how to break the paycheck-to-paycheck cycle. 


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