7 Different Types of Savings Accounts and How To Use Them

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We talk a big game over here about saving for this and saving for that, but what does that even mean? This is a basic primer on different options for different types of savings accounts.


Your first savings account was probably piggy bank, and then maybe you graduated to a passbook account at the local bank branch. When you started adulting you probably got a checkbook and ATM card and diligently tracked your spending in the little ledger. How quaint! Now most employers won't deal with anything other than direct deposit, most of us don't have checks, and you just swipe/tap/chip/Venmo for everything from a pack of gum to your mortgage. I bought a 40 cent donut in the middle of a field with a credit card last week! What a time to be alive.

Bank savings account: You can absolutely still have a savings account at your local branch. If you have a cash-based income, this might be your only option. When I was a server/bartender I would save all my paper money in an envelope in the freezer and deposit it all at the bank on Monday morning. The tellers were always happy to help me move 10% into my attached savings account. Probably because they were just so excited to see people actually walk into the bank.

Online savings account: Ally and Synchrony are almost always on top of the NerdWallet high-yield savings account list. The can connect to your checking account and most offer reimbursement of ATM fees.

Money market account: Money market accounts are great because you get (teeny tiny) bit more interest and the money is just as liquid as a regular savings account. The more money you put in the higher the rate in most cases. There are good deals to be had, but you generally need more than $5,000 to start to really make it worth it.

Prepaid cards: These can totally be a valuable tool in your savings arsenal — just so long as you use them wisely. These cards are typically marketed towards people who have failed with traditional banking and have to find somewhere to deposit their paycheck. You can park your money for free and even gain a bit of interest, but it will cost you to use the funds. But! If the whole point is to put money on the card and not touch it unless it's an emergency then those fees might stop you from using it. A good idea if you're saving for a big ticket item.

Credit unions: Credit unions are a non-profit version of a bank. They offer stellar rates on everything from savings accounts to home loans and have amazing customer service. It isn't like to old days when you had to be a teacher or a mechanic in a certain city to join a CU. Find one near you and check it out! They are the originators of the "Christmas Club" and offer lots of similar programs.

Health savings account: HSAs are savings accounts you use only for out-of-pocket healthcare expenses. You save your funds pre-tax, which can be a significant amount of money depending on your health costs. If you've recently been prescribed an expensive medication, have a high-deductible savings account, or you buy a lot of OTC medications you should have an HSA. It's not a "use it or lose it" situation, so you can't lose.

529 accounts: Each state sponsors its own college savings program called a 529. Anyone can open an account, anyone can contribute, there are not maximums, and you keep the account stagnant for years without fault. The money can be used ONLY for college and college related expenses. So long as you use it for that you can withdraw the funds tax-free. Also, you get a little sweetness from the state each year when you file your taxes.

Whatever you are trying to save for, there's an account out there that will help you do it. Saving for a mini-emergency, a safety net, a trip to Mexico, or just stress-free holiday shopping is within your reach. You just actually have to do it, which is the really hard part.

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