Saving money isn’t always easy, but it’s the first step to being financially stable. And when it comes to saving money, there are a few things you should think about.
You should think about where you want to save your money, how much money you want to save, and whether it’s important to you to have easy access to your money.
Most banks and credit unions offer Savings Accounts, Money Market Accounts (MMAs), and Certificates of Deposit (CDs). Each one is good for something different and can help you reach different financial goals in different ways.
Read more: See the best bank promotions here…
Savings Account vs MMA vs CD
Each of these accounts helps you save money, but in very different ways.
Let’s look at this comparison chart to see how Savings Accounts, MMAs, and CDs are alike and how they are different:
| Feature | Savings Account | Money Market Account | CD |
|---|---|---|---|
| Minimum Balance | Lower or no minimum | Higher minimum | Higher minimum |
| APY | Lower interest rates | Lower interest rates | Higher interest rates |
| Liquidity | Higher | Higher | Lower |
| FDIC-insured | Yes | Yes | Yes |
In the next sections, we’ll talk more about each type of account, including who it’s for and what its pros and cons are. We’ll also look at some of the best accounts you can get right now.
What Are Savings Accounts?
Savings accounts are bank accounts that are used to keep money for a longer time so that you can save money. You can typically only make six withdrawals per month.
CDs tend to pay more interest than Savings Accounts.
Most of the time, there aren’t any minimum balance rules. This can be one less thing to worry about, especially if you’re starting to save money. You can also take money out of the account whenever you want (with the monthly limit in mind).
Regulation D
Regulation D is a rule that the Federal Reserve put in place. It covers Savings Accounts, Certificates of Deposit, and Money Market Accounts. It says that a person can only take out or transfer money from their account 6 times a month.
If you withdraw more than six times, you might have to pay a fee.
Most banks and credit unions have rules that are a little bit different from one another. If you’re not sure, check with the bank where you keep your money.
Who Should Have A Savings Account?
Savings accounts are great for people who want to save money in a safe way. Most banks and credit unions don’t have minimum balance requirements, so they are good for people who are just starting to save money.
The FDIC will cover up to $250,000 in Savings Accounts. This means that if something bad happens to the bank, you can still get up to the insured amount of your money. If your balance gets higher than the insured amount, you might want to open another account to keep yourself safe.
Online Savings Accounts usually have higher interest rates than traditional ones.
Savings Account Pros & Cons
Savings accounts have pros and cons just like any other type of bank account. Obviously, this depends on how much money you have and what you want to do with the account.
Pros:
- Accounts are FDIC/NCUSIF insured – Savings accounts are insured up to $250,000.
- Money can be withdrawn easily – Withdrawing money from a Savings account is generally hassle-free.
- There is no minimum balance to maintain – Most online options do not impose a minimum balance requirement for this type of bank account.
Cons:
- The interest rate offered is on the low side – Savings accounts tend to have lower interest rates, but this has changed as of late 2022.
- Limited withdrawals compared to checking accounts – Regulation D limits the number of withdrawals from this type of account to 6 a month.
Best Savings Accounts
Most banks and credit unions have Savings Accounts. Here are some of the best rates from trusted banks nationwide:
Read more: Here are the best nationwide Savings rates…
What Are Money Market Accounts?
A Money Market Account is basically the same as a Savings Account, but it has some extra features. Think of a Money Market Account as a mix of a Savings Account and a Checking Account. It has the best parts of both.
Money Market Accounts, also called MMAs or Money Market Deposit Accounts (MMDAs), are a type of bank account used to save money.
Usually, they have a minimum balance requirement, which is different from a regular Savings Account. In exchange, MMAs usually have higher interest rates, but this isn’t always the case.
Most MMAs come with a debit card and the ability to write checks. The FDIC also insures these accounts.
The NCUA insures MMA accounts at credit unions. Before opening an account, you should always check with your chosen financial institution to make sure you’re safe.
Most of the time, MMAs are very safe and have very few risks. Because of this, they are a great way to save money and have easy access to funds.
Who Should Have A Money Market Account?
Money Market Accounts are different from regular Savings Accounts in that they usually have a minimum balance requirement. This means that you need to have some money saved up already.
Most of the time, the minimum balance requirement will be anywhere from $500 to $25,000. This will depend on the bank you choose.
Most Money Market Accounts come with an ATM card, and you may be able to write checks on the account as well. If you want to write checks, you should check with your bank first to see if this is a service they offer.
Money Market Account Pros & Cons
The pros and cons of this type of account will depend a lot on how much money you have and what you want to do with it. In either case, knowing the pros and cons can help you make a smarter, more well-informed decision about your finances.
Pros:
- High-Interest rates – Generally speaking, MMAs tend to have higher interest rates, although this is not always the case.
- Insured by the FDIC or NCUSIF – The FDIC also insures MMAs if the account is held with a bank or NCUSIF if it is held with a credit union.
- Highly liquid – You can withdraw cash from your account at any time, with some accounts even including a debit card.
Cons:
- A limited number of monthly transactions – You might experience some limitations when it comes to withdrawing money.
- High minimum balance – MMAs generally have a higher minimum balance requirement than their Savings counterpart, with the amount varying from one financial institution to another.
Best Money Market Accounts
We will now look at some of the best Money Market Accounts available today. Take the time to find the applicable requirements when applying for an account.
What Are Certificates of Deposit (CDs)?
Certificates of Deposit, or “CDs,” are a more structured way to save money because you have to keep them for a certain amount of time.
The term is this amount of time, which can be anywhere from six months to five years or more.
Once the term is over, the CD reaches what’s called the “maturity date,” which is when you get your money back plus any interest that has been added.
Two Types Of CDs: Fixed Rate & Variable Rate
Fixed-rate CDs have a fixed APY (Annual Percentage Yield). The interest rate will stay the same over the term, so you can figure out how much money you will get when everything is paid out at the end of the term.
Variable-rate CDs, on the other hand, have an interest rate that can change over the term of the CD. The bank or credit union will explain how the APY rate can change. Since the rate can go up or down, it is a little bit riskier.
Still, because CDs are held for a set amount of time, their APY rates are usually higher than those of Money Market Accounts. This is one of the most important things CDs can do for you. On the other hand, if you want to take money out of your account early, you will probably have to pay penalty fees.
CDs are also insured by the FDIC or the NCUA. Before opening an account, you should always check with the bank of your choice to make sure this is true.
Who Should Get A Certificate Of Deposit?
Because CDs are held for a set amount of time, they are better for people who want to save for a long time and know they won’t need the money during that time.
This means that if you are just starting to save money, CDs might not be the best type of account for you, at least at first.
On the other hand, CDs can be a good choice if you have been saving for a while or if you have come into some extra money.
Most CDs also have a minimum amount you need to put in.
CDs Pros & Cons
The pros and cons depend on what you want to do and how much money you have when you open the account.
If you know what this type of bank account offers, you can decide if you want to include it in your short-term or long-term financial plan, or if you don’t need it at all.
Pros:
- High-interest rates: CDs offer some of the highest APY rates around, especially for the longer terms.
- Flexible terms: You can choose between short-term or long-term CDs.
- Safety: The FDIC or NCUA ensures most CD accounts up to $250,000 – confirm this with the bank or credit union of your choice before opening the account.
Cons:
- Minimum deposit requirements: Most CDs have a minimum deposit requirement that can be quite high for first-time savers.
- Less flexibility: Since CDs are held for a set term, access to funds is limited during the term, with the possibility of an early withdrawal penalty.
If you’re interested in opening a CD account, be sure to read about CD laddering first.
Best CD Accounts
Below are a few banks that consistently offer competitive CD rates:
Read more: See the best nationwide CD rates…
Money Market vs CD vs Savings Account: Which Is Best For You?
Saving money is a surefire way to improve your personal finances. Money Market Accounts, CDs, and Savings Accounts are all good places to put your money.
To sum up, Money Market Accounts usually have higher minimum deposits, which usually means they also have better interest rates. To get the most out of a Money Market Account, you’ll need to keep your money there for a longer time. This means that they’re probably not the best choice for short-term goals.
Savings accounts will give you the most flexibility and are great for first-time savers.
CD accounts are best for those that have more experience saving money and extra funds to put away for longer periods of time.
READ MORE: SEE THE BEST BANK BONUSES HERE AND THE BEST INVESTING BONUSES HERE.
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