Which Type of Savings Account Will Best Put Your Money to Work?

June 12, 2023 |
Article | 5 min
| Personal Insights

There are various types of savings accounts to consider when preparing for financial stability, regardless of where you are in your personal or professional life. Consistently setting aside a portion of your income is important to prepare for the unexpected.

Accumulating a nest egg enables you to build wealth for long-term goals such as buying a home, retiring, or funding your child's college education. It is beneficial to understand that each savings account type has unique uses, advantages, disadvantages, and interest rates.

How Much Savings Should You Have at Different Stages of Life?

Everyone has their own lifestyle, income, and goals. Your savings goals will largely reflect your circumstances. However, there are some commonly held benchmarks among financial experts. You can use these examples to measure your progress.

Age can be a key indicator of financial status. Young people in their 20’s are just entering the workforce and can have more outstanding debt, such as student loans. As a result, they tend to focus their budget on paying down their obligations and creating an emergency fund.

People in their 30’s and 40’s often focus on saving for a down payment on a house, paying down their mortgage, and accumulating a retirement fund. Finally, people in their 50’s and 60’s hopefully have nearly reached their retirement savings goals.

Generally, experts suggest sticking to the 50-30-20 rule, saving around 20% of your annual income, spending 50% on your daily needs, and using 30% for fun. Although, these percentiles will largely depend on your income and goals.

Types of Savings Accounts and What Questions to Ask

Determining which of the following types of savings accounts is the best fit for your circumstances and goals is simply a matter of understanding the uses of each. So, as you explore the attributes and drawbacks of each account type, try to keep your goals in mind.

Ask yourself if the account structure fits your timeline and intended purpose for your accumulated funds. The right account for you will be the one that best fits your 5-, 10-, or 20-year plan.

Traditional Savings Account

As you first begin your savings journey, a traditional savings account is the best standard option to explore.

This account type features high liquidity. In most situations, there aren’t any withdrawal penalties as long as you maintain the minimum balance. It also comes with limited risk, as your savings aren’t subject to market fluctuations. However, these benefits come at the cost of your fund’s interest rate and annual percentage yield (APY). Learn more about our Statement Savings account here.

Ultimately, this is a good option if you’re just beginning to save and want to retain the ability to withdraw from the fund at will.

Money Market Accounts

Money market accounts essentially function as a combination of checking and high-yield savings accounts. Some may come with check-writing privileges and frequently require a larger minimum deposit. However, they typically boast a competitive interest rate and APY. Learn more about our Premium Money Market account's specific features and benefits here.

This account type is an excellent option for emergency funds. There’s easy access to your money and high-interest rate benefits.

Certificate of Deposit Accounts

The Certificate of Deposit (CD) is a type of savings account that is less flexible than traditional or high-yield options because they hold a fixed sum for a predetermined time period.

There are penalties for early withdrawal. But when you redeem your CD at maturity, you receive your investment amount plus accumulated interest in one lump sum. CD accounts generally offer higher interest rates, and the terms may either be fixed or fluctuate with the market. Learn more about our Certificate of Deposit options here.

Specialty Savings Accounts

Consider specialty savings account options if you’re saving for a unique and specific purpose. These accounts can be opened for specific individuals like kids or students. They can be tailored to cover certain costs like health savings accounts, IRAs, college funds, and flexible spending accounts.

The terms associated with these options are unique to each account type. Some may come with early withdrawal penalties.

Getting that Professional Edge

As you can see, there are many different types of savings accounts to choose from, each with unique benefits and drawbacks. Some accounts are geared toward specific purposes, and others offer more general attributes.

Selecting the right one for you can significantly enhance your savings effort. So, it’s best to seek expert advice on your situation to make sure you’re set up for success. A trusted financial partner will help you select your account type, optimize your savings for tax efficiency, and balance your budget to maximize your savings.

Discuss the Types of Savings Accounts with a Trusted Expert

Saving is the first step toward your financial future. It prepares you for building your wealth, covers you during inevitable emergency situations, and sets the stage for your eventual retirement. A financial matter of this magnitude requires expert advice, so reach out to the experienced partners at Arizona Bank & Trust, a division of HTLF Bank to create a plan for your future.

The sooner you start saving, the better. After all, your money needs time to accumulate interest. Reach out to us today to review the types of savings accounts and choose the one that’s best for you.