One of the most common pieces of financial advice that is published today is the recommendation that those over the age of 25 should save between 10-15% of their income. Although this advice has been frequently printed, little information is given regarding the different types of savings accounts available to Americans. Today, as few as 25% of Americans own a high-yield savings account, and instead, the majority of the population uses traditional savings accounts with an average interest of 0.09%. Kevin Canterbury, Financial Advisor and founder of Arizona-based Redstone Capital Management, recognizes the low rate of financial literacy in America and hopes to educate the American public on finances foundational concepts. Today, Arizona native Kevin Canterbury will discuss different types of savings accounts and how they can help American’s grow their savings.

High-Yield Savings Account

High-yield savings accounts are an excellent option for those looking to earn more competitive rates on their savings while minimizing additional fees. One of the most notable attributes of high-yield savings accounts is that they offer a higher APY (Annual Percentage Yield) than traditional savings accounts. Most often, consumers can find high-yield savings accounts at online banks that are looking to attract a strong customer base. High-yield savings accounts have the same insurance as traditional savings accounts (FDIC or NCUA insurance) but will often offer better rates, fewer or lower fees, including excess withdrawal fees.

High-Yield Pros

–       Higher interest rates

–       Lower minimum deposit requirements

–       Fewer or lower monthly fees

High-Yield Cons

–       High-yield accounts may or may not provide access to money via ATM

–       Money transfers between an online savings account and other accounts can take days to process

–       No brick and mortar branch to deposit cash directly into a savings account

Money Market Accounts

On a recent survey, researchers found that some of the most important things consumers look for in a savings account are accessibility and high interest. Money market accounts (MMAs) are an excellent option for those looking for a savings account that offers these features, as MMA accounts allow users to earn interest on savings while accessing their savings through checks or with a debit card. As with other savings accounts, MMA accounts come with six withdrawals per month limits despite the federal Regulation D restrictions. With this in mind, MMA accounts do offer consumers a wide range of benefits with minor cons.

MMA Pros

–       Better rates than a traditional savings account

–       Access money via debit card, ATM card, or check

–       Access to a brick and mortar bank location and online bank

MMA Cons

–       Higher minimum deposit

–       Tiered interest rates

–       Possible monthly fee

Cash Management Account

Cash management accounts are an excellent option for people looking to invest in their brokerage or retirement account. While cash management accounts are not technically savings accounts, they do let you hold cash that can be invested in a taxable brokerage account or retirement account. For those looking for an account that can earn them high-interest rates, a cash management account may offer higher rates than other accounts traditionally found at a bank.

Cash Management Account Pros

–       Conveniently earn interest on money that is set aside for investments

–       Accounts are FDIC insured when offered through third-party banks

–       Wide variety of benefits and features for both savings and checking accounts

Cash Management Account Cons

–       Accounts are not always covered by FDIC insurance

–       Cash Management Accounts may not have access to branch banking

–       High-yield savings account can offer better interest rates

Disclaimer:  This material is for educational purposes only. It’s not intended to be used as the primary basis for investment decisions, nor should it be considered legal or tax advice, as appropriate, regarding the evaluation of any specific information, opinion, advice or other content.  Investors should consult with a properly qualified financial professional prior to making any investment decision.  The firm does not offer legal or tax advice.