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3 Ways to Save: Money Markets, CDs, or Savings Accounts?

3 Ways to Save: Money Markets, CDs, or Savings Accounts?

Financial Education / 3 Ways to Save: Money Markets, CDs, or Savings Accounts

Savings accounts are good to have for setting money aside for future goals and emergency expenses. There are three major types of savings accounts that you can open up at a bank or credit union: Traditional Savings, Certificate of Deposit (CD), and Money Market accounts. 

Each of these account types has unique features and benefits, so choosing the one that’s right for you starts with understanding your individual preferences. Are you starting from $0 or do you have funds you want to secure? Do you want the ability to withdraw money whenever you need it, or are you hoping to build your funds with interest payments?

Once you have a good idea about your preferences, you can compare the different types of accounts. Here is how savings, CDs, and money markets work.
 

For secure storage: Traditional Savings Account 

How they work: A savings account is intended for depositing funds and keeping them there, as opposed to a checking account where frequent transactions in and out are made. Many savings accounts also earn interest, though rates are generally very low. In July 2022, for example, the national average reported by the Federal Deposit Insurance Corporation (FDIC) was 0.1%, but these rates change often. High-yield savings accounts, typically available from online banks, offer slightly higher interest rates. 

Good for: Savings accounts are good for every type of saver. They are a safe place to keep your money since they are insured (up to $250,000) by the FDIC. One common savings strategy is to automate small deposits from your paycheck into your account so that it grows. Some people consider savings accounts as “rainy day” funds to have in case of an emergency, while others use them to save toward a specific goal or event.   

What you should know: Savings accounts typically do not have checks or debit cards, and are not intended to be used on day-to-day spending. Depending on the account set up, withdrawals may not be allowed, or may be limited, though some permit account holders to link to a checking account for more frequent use. Be aware that some may require you to maintain a minimum balance amount in order to avoid monthly fees.

Start saving today with a competitive interest rate on our most popular savings account:

GET SAVINGS ACCOUNT DETAILS


For guaranteed earnings: CDs  

How they work: A Certificate of Deposit is a type of savings account that earns a fixed interest rate for a set period of time. So for example, you might get a two-year CD with a 1.50% interest rate. Usually, CD rates are higher than savings or money market accounts, but you may have to shop around since rates are always changing. 

Good for: If you want to earn interest on money that you don’t need to access for a while, a CD gives you a guaranteed rate of return. For example, let’s say you have $5,000 saved up for a car but you know you’re not buying for at least 18 months. You might consider a 6-month or 1-year CD so the money is locked up, and you’ll get some extra earnings on top.  

What you should know: An important thing to remember is that with a CD you’re tying up a sum of money for a period of time. If you decide you want to withdraw from a CD early, you’ll be hit with a penalty fee. The other thing to be aware of is that once the CD term expires, it requires action on your part — or it will automatically be rolled into a new term. 

If the structured-saving of the CD sounds like a good option for you, try one of ours:

GET CD ACCOUNT DETAILS


For “best of both worlds” savings: Money Market Account 

How they work: Money market accounts generate higher interest like a CD, but you can move funds in or out whenever you want, like a traditional savings account. Money markets have fluctuating interest rates that are usually higher than what regular savings accounts offer, and some introductory offers may guarantee a rate for a set amount of time. 

Good for: Money markets are good for people who want to earn higher interest on their funds, but also want to have access to those funds (which CDs do not allow for). 

What you should know: While account terms vary by institution, many money markets require a minimum deposit to open the account (which could be a few hundred or thousand dollars). Others might require that you maintain a minimum balance amount to avoid monthly fees. 

If you’re looking to make the most of your savings, our money market account is the solution for you:

GET MONEY MARKET ACCOUNT DETAILS


Should You Open a Savings, a CD, or a Money Market account? 

Depending on your financial situation and goals, there may be points in your life when one type of savings account makes more sense for you. Or, you might decide to have all three types of savings accounts at once so you can enjoy the benefits of each. When deciding, think about your goals, how much interest you want to earn, and when and how often you’ll want to be able to access the funds. 

Most people open a traditional savings account when they’re starting from scratch. CDs can be worth looking into when you want to earn guaranteed interest on funds you know you won’t need for a while. But if you’d rather enjoy the benefits of a traditional account with a better interest rate, and without locking up your cash, a money market could provide that happy medium. 

 

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Savings account CDs Saving money Money Market account

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