Types of Savings Accounts

Key insights:

• A savings account is a bank deposit account that generally earns interest while keeping your funds accessible
• There are generally a few types of savings accounts: traditional savings accounts, money market accounts, and certificates of deposit
• Choosing an account depends on your financial goals, timelines and how often you need to access your money
• You don’t have to choose just 1 account type — spreading your funds across multiple savings accounts could help balance accessibility and interest earnings

Saving can help you work toward a financial goal and ensure you have extra funds in the future. But where should you keep your savings? There are several types of savings accounts to choose from, including traditional and money market accounts.

Whether you’re building an emergency fund for unforeseen expenses or saving for a down payment on a home, choosing the right account can help you make the most of your savings.

Read on to learn about different types of savings accounts and how to choose one that aligns with your priorities.

Traditional savings accounts

A traditional savings account is a basic deposit account offered by banks and credit unions that typically allows you to save money while earning some interest. Traditional savings accounts might give you easy access to your money, and you may be able to link it to your checking account or another deposit account. Keep in mind that your bank may limit the number of withdrawals per month.

Pros:

• Highly accessible for everyday transfers
• Easy to link to an existing checking account
• Low minimum balance requirements at many banks

Cons:

• Typically lower interest rates than other types of savings accounts
• Some banks may have limits on monthly withdrawals

Money market accounts

A money market account is a savings deposit account with some features of a checking account. Generally, interest in a money market account compounds daily and is paid out monthly. The interest rate is often variable, and some banks may offer higher rates for larger balances.

Some money market accounts allow you to write checks and make ATM withdrawals. However, your financial institution may still impose limits on the number of monthly withdrawals or transfers.

Pros:

• Earns interest
• Easy access to funds via check-writing and ATM cards

Cons:

• Not all banks offer them
• Possibly higher minimum balance requirements than traditional savings accounts
• May involve monthly service fees

Certificates of deposit (CDs)

Traditional certificates of deposit (CDs) are typically time-bound accounts with fixed interest rates. This means you leave your money in the account for an agreed-upon period, called the term. Terms often range from a few months to a few years. During this period, you earn a fixed interest rate. Early withdrawal of deposits could result in fees. Once the CD matures and the term ends, you may withdraw your funds or roll them into a new CD.

A CD might be ideal if your priority is earning interest and you don’t plan to access your money right away. CDs are usually available at both traditional and online banks.

Pros:

• Fixed interest rate options for predictable growth
• Potentially higher returns than traditional savings accounts
• Encourages disciplined saving since funds are locked away

Cons:

• You may face an early withdrawal penalty if you want your funds before the CD matures 
• Not suitable for an emergency fund

Comparing different types of savings accounts

When deciding which type of savings account works better for you and your money, comparing features side by side can be helpful.

Factors to consider when choosing a savings account

The savings account you choose will depend on factors like your financial goals and how accessible you need your money to be.

For example, if you’re looking for the most accessible account for short-term savings goals, a traditional savings account might make more sense. If your top priority is to grow your money while keeping it somewhat accessible, you may want to consider a money market account. For longer-term goals where you won’t need access to your money for a set period, you might earn more interest with a CD.

Build your financial future with a Citi^® Savings Account

Understanding the different types of savings accounts is the first step toward managing your money more effectively. Whether you’re building an emergency fund or seeking competitive interest rates, there is an account designed to fit your needs. By carefully weighing the pros, cons and features of each type, you can make an informed decision.

Ready to put your money to work? Apply for a Citi Savings Account today and start planning for your future goals.

Savings accounts FAQs

Which type of savings account is the best?

There is no single “best” savings account — it depends entirely on your current financial situation and goals. If you’re building a flexible emergency fund, a traditional savings account may be a strong fit. If you’re saving for a home down payment within the next 2 years and want to lock in a guaranteed rate, a CD could be a good option.

How much money should you have in a savings account?

Many financial professionals suggest keeping 3 to 6 months’ worth of living expenses in an easily accessible savings account to act as an emergency fund. For other goals, the amount you keep in savings depends on what you’re saving for and your monthly budget.

How many savings accounts should I have?

You’re not limited to just 1 account. You may choose multiple savings accounts for different purposes. 

For instance, you might decide to keep some money in a traditional savings account linked to your checking account for daily emergencies, and lock away longer-term savings in a CD.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.