We personalize our smartphone home screens, our music playlists, our living room décor and our meal choices. But when it comes to different types of savings accounts, many people don’t realize how to find the right fit for their short- and long-term goals. Instead of choosing a one-size-fits-all account, try to find a savings account that helps you match what you want to accomplish within your allotted time frame. Here are some ideas.
Goal: An emergency fund
Type of savings account to consider: a higher yield savings account
What to know: In exchange for an increased interest rate, savings accounts such as this often have higher minimum balances and may charge fees, too. Theoretically, emergency funds are used infrequently, so the trade-offs might be worth it.
Goal: A big trip in a few years
Type of savings account to consider: a certificate of deposit (CD)
What to know: Minimum balances vary, and renewal options let you put your money in a CD and forget it; you can’t access the funds without penalty until the term is over. CD terms typically range from about six months to five years; the longer the term, the better the interest rate. One thing to note: When mature, CDs automatically renew unless you direct the bank otherwise.
Goal: A new car this year
Type of savings account to consider: a traditional savings account
What to know: Most savings accounts offer online access, making it easier to transfer money and check your balance. In addition, some may not require a minimum opening deposit and will let you make direct deposits, which can help if you want to set up an auto-transfer option. Finally, while the interest rate may be lower than other savings account types, you may have quicker or easier access to funds.
Goal: A home down payment
Type of savings account to consider: a money market account
What to know: In some ways, money market accounts resemble savings accounts. However, they may offer higher rates — even promotional introductory rates. Some have minimum balances, like $500 or $1,000, that the saver must maintain to avoid fees, compared to lower or no minimum balance requirements with traditional savings accounts.