Demystifying the 4 Major Savings Options

All savings options are pretty much the same, right? Wrong. There are a variety of different savings solutions available now, but the big four are: Basic savings/share savings accounts, online savings accounts, certificate of deposit/share certificates, and money market accounts. Each of these savings vehicles have unique elements; the trick is finding out which one is best suited to your lifestyle and savings goals. With 57 percent of American’s maintaining a savings account balance of less than $1,000 (and a whopping 39 percent of those maintaining a $0 balance), there’s no better time than the present to start saving for a goal, a rainy day, or the future.

So, let’s explore the different types of savings accounts:

  • Basic Savings/Share Savings Account

This is probably the first thing that comes to mind when you think about saving money—after all, it’s in the name! If you join a credit union, you open a share savings account for a low minimum balance in (typically between $5 and $25). Basic savings/share savings accounts allow you to deposit money, earn interest, and make withdrawals. If you open a savings account with the same financial institution where you have your checking, you can easily transfer money between the accounts and even set up automatic transfers. The interest rate on traditional savings accounts does tend to be lower than other savings options may offer—but they typically offer more flexibility and greater access to your money than a certificate or money market account. Withdrawal limits and specifics can vary institution to institution, so make sure you do your research first.


  • Online Savings Account

At face-value, an online savings account may resemble a traditional one, but there are a few key differences. An online savings account is just that: Online. There is no brick and mortar branch to visit for deposits, withdrawals, and customer service. All of your transactions are conducted online and money is deposited by linking another bank account and conducting transfers. The other notable difference is the interest rate. Online savings accounts typically offer higher interest rates than traditional ones.


  • Certificate of Deposit/Share Certificate

Certificates of deposit (CDs)/Share certificates typically offer higher interest rates, but with that high rate comes the inability to access your money for a set period of time. The length of your certificate can vary from as little as 21 days to as long as 10 years—if you take any of your money out before the term ends, you’ll pay a penalty. That’s why it’s essential for you to determine if you can afford to put that amount of money in an untouchable account, and how long you’re able to go before you need access to it. For some savers, this is too much of a commitment, but for many savers, the restriction is worth the higher interest rate.


  • Money Market Account

A money market account is essentially a hybrid of a checking and savings account. It allows you to write checks from your account, but only a certain number each month. Some accounts may even allow you to access your money via a debit card. They also feature higher interest rates than a standard savings account but tend to require larger deposits and a higher minimum balance. This is a good option if you’re in a position to make large deposits, but also want to keep limited access to your money.

Want to know more about savings accounts, create a budget action plan, learn smart savings habits, and find the right savings account for you? Visit Suffolk Federal’s Financial Empowerment: Online Workshop and begin the Savings module to get started.

« Back to News Listing