Types of savings accounts, explained

Key takeaways

  • Common types of savings accounts include traditional savings, high-yield, money market accounts, and certificates of deposit.
  • The many different types of savings accounts vary by term length, interest rate, and flexibility.
  • Before deciding on a type of savings account, it's helpful to set savings goals and priorities.

Saving and budgeting are often the core pillars of financial planning, and with two-thirds of Americans feeling behind in their savings goals, knowing how and where to save is critical.2

Whether the financial goal is short, mid, or long term — this could include buying a home, preparing for a vacation, paying for education costs, or starting an emergency fund — a savings account may help people reach it.

Many types of savings accounts depend on savings goals and timeframes. Some people may want emergency savings for unexpected costs, and others may just want to feel more financially secure simply by having cash reserves.

From traditional savings accounts to money market accounts to CDs, here's a look at 12 savings account options.

Table of contents

  • Traditional savings accounts
  • High-yield savings accounts
  • Money market accounts
  • Cash management account
  • Certificates of deposit
  • Notice savings account
  • Guaranteed investment certificates (GICs)
  • Health savings accounts (HSAs)
  • Retirement-focused savings accounts
  • 529 savings accounts
  • Savings accounts for students
  • Key considerations when choosing a savings account
  • Save now and later with PayPal
  1. Traditional savings accounts

    Term length: Short, medium, or long

    Traditional savings accounts are often suitable for everyday needs since they usually offer high-level security and easy access to funds. They may have minimum balance requirements and allow withdrawals and transfers with a debit card.

    The primary drawback of traditional savings accounts is that they generally offer lower interest rates than high-yield savings accounts or other investment options. This makes them better for short-term savings and everyday expenses, but money can sit in these accounts for various term lengths.

  2. High-yield savings accounts

    Term length: Short or medium

    As the name suggests, high-yield savings accounts may have a higher annual percentage yield (APY) — the percentage rate of interest earned per year — which may result in slightly more savings growth.

    Some high-yield savings accounts may restrict account holders to a set number of withdrawals within a specific timeframe.

    Some high-yield savings accounts may need account holders to maintain a minimum balance to get high interest rates. This makes high yield ideal for short and medium-term savings.

  3. Money market accounts

    Term length: Short or medium

    Money market accounts blend the features of savings accounts with some checking account capabilities, such as check writing. They may offer higher interest rates than traditional savings accounts, potentially helping savings grow faster.

    However, money market accounts may have higher minimum balance limits, which can restrict an account holder’s liquidity. This means quick access to cash held in the account may be difficult.

  4. Cash management account

    Term length: Short or medium

    A cash management account (CMA) is a savings account type that’s typically offered by nonbank financial institutions like brokerage firms or robo-advisors, which are typically not insured by the FDIC. CMAs blend features commonly found in both checking and savings accounts while offering competitive interest rates on uninvested cash.

    It's a central hub for managing everyday cash, offering conveniences like a debit card, check-writing, bill pay, and direct deposit.

    CMAs differ from traditional bank accounts by often sweeping deposits into partner banks, ensuring FDIC insurance. This structure enables CMAs to provide accessibility, potentially higher yields than checking accounts, and integrated investment access within one platform.

  5. Certificates of deposit

    Term length: Medium

    Certificates of deposit (CDs) provide a fixed interest rate over a specific term, which can range from a few months to several years. Funds in a CD are locked in for the term length, and withdrawing money early could incur significant penalties.

    CDs typically provide higher interest rates, offering a guaranteed return if the funds are left untouched for the full term.

  6. Notice savings account

    Term length: Short, medium, or long

    Notice accounts offer a middle ground between highly liquid savings accounts and fixed-term CDs. With a notice account, users commit to providing a specific advance notice — such as 30, 60, or 90 days — before they can withdraw their funds.

    In exchange for this waiting period, notice accounts typically offer a higher interest rate than standard high-yield savings accounts, but they don't lock money in as rigidly as a CD. This can be a suitable option for savers who want a better return on money that they don't need immediate access to.

  7. Guaranteed investment certificates (GICs)

    Term length: Short, medium, or long

    A guaranteed investment certificate functions similarly to a CD, except insurance companies issue them rather than banks or credit unions.

    When purchasing a GIC, individuals deposit a lump sum of money with an insurance company for a fixed period (the "term"). In return, the company guarantees a set interest rate for that entire term.

    GICs are typically a low-risk investment because the principal investment is guaranteed, along with the promised interest, assuming the issuing insurance company remains solvent. They offer predictable returns and may be more suitable for savers who prioritize capital preservation over higher growth potential.3

  8. Health savings accounts (HSAs)

    Term length: Short, medium, or long

    A health savings account is a powerful, tax-advantaged savings account specifically designed to help individuals save and pay for qualified medical expenses.

    To be eligible for an HSA, a person must be enrolled in a High-Deductible Health Plan (HDHP). These accounts typically have lower monthly premiums but require more out-of-pocket payments for healthcare services before insurance coverage begins.

  9. Retirement-focused savings accounts

    Term length: Long

    Retirement savings accounts are long-term savings accounts that individuals can only access after retirement. There are two main non-employee-sponsored retirement savings accounts:

    • Traditional IRAs: Traditional IRAs enable tax-deductible contributions, with withdrawals in retirement taxed as ordinary income.
    • Roth IRAs: With Roth IRAs, contributions are made with after-tax dollars, allowing for tax-free withdrawals in retirement.

    IRA funds are generally less accessible before retirement than funds in a Roth IRA, with penalties for early withdrawals. The IRS sets annual contribution limits, so there's a limit to how much money can be put into these accounts. As of 2025, the IRS set limits are $7,000 for individuals under age 50, and a catch-up limit of $1,000 for people 50 and above.4

  10. 529 savings accounts

    Term length: Medium or long

    A 529 plan is a tax-advantaged savings plan that is one of the types of college saving accounts or types of savings accounts for kids, designed specifically to encourage saving for future education expenses.

    Offered by states or state agencies, these plans allow contributions (made with after-tax dollars) to grow tax-free, and withdrawals are also tax-free at the federal level (and often state level) when used for qualified education expenses.

    Should the original beneficiary not pursue higher education, the account owner can typically change the beneficiary to another eligible family member.5

  11. Savings accounts for students

    Term length: Medium or long

    Many banks and credit unions offer standard savings accounts with features and benefits tailored to students. These accounts recognize that students often have limited income and primarily focus on convenience and minimizing fees, including perks like:

    • No monthly maintenance fees
    • Lower minimum balance requirements
    • Waived ATM fees

    These accounts serve as a practical tool for students to manage their money, save for short-term goals like textbooks or travel, and build healthy financial habits. Many major banks and online-only institutions offer such accounts, sometimes requiring proof of enrollment or an age restriction (e.g., under 25) to qualify for student benefits.

Key considerations when choosing a savings account

With different types of savings accounts to choose from, it’s important to consider a range of factors when selecting one.

Different accounts may offer varying interest rates, fees, and accessibility. Certain features may affect the ability to reach savings goals. Those shopping for a savings account should consider the following factors:

  • Minimum balance rules
  • Interest rates
  • Funds access
  • Account type
  • Account fees

Certain savings accounts often align with a specific type of financial objective, so it's important to set saving goals before shopping around and comparing features before making a decision.

Save now and later with PayPal

Each of these types of savings accounts has benefits and considerations. It’s critical to do thorough research and compare plans to decide on the best option, for short-, medium-, or long-term financial resolutions.

With PayPal, users can easily track progress toward goals and set up automatic deposits, all with no hidden fees or minimum deposit.

Learn more about how reachable your goals are with PayPal Savings.1

Related content

All in the

PayPal app

It's your do-it-all digital wallet. Load up on cash back offers before you shop. Track your packages. And manage it all on the go.