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Types of savings accounts: 12 options to save money

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Looking for the best savings accounts to help you keep or grow your money? There are plenty of options beyond a regular savings account.

Here is a rundown of several types of savings accounts:

1. Savings deposit accounts

These are interest-bearing bank accounts that allow you to withdraw money at any time, but you are limited to six transfers out of the account per month. This includes transfers to third parties or to other accounts of yours. Money market accounts are similar and are governed by the same restriction on transfers.

2. Jumbo savings accounts

These are the same as savings accounts, but "jumbo" generally refers to deposits of $100,000 or more. Banks sometimes pay a higher interest rate on such large deposits for jumbo savings accounts.

3. High-yield savings accounts

This is not a technical term, but "high-yield" is used to designate accounts that are paying relatively high interest rates compared to the prevailing average. There may be a high minimum balance or other requirements necessary to qualify for a high interest savings account.

4. Rewards savings accounts

These are savings accounts that offer special incentives tied to things like starting a new account or reaching specific balance levels. Always calculate the value of rewards as a percentage of your balance and include that in any interest rate comparison when shopping for savings accounts - a reward may not be worthwhile if it means accepting a lower interest rate than you could get elsewhere.

5. Joint savings accounts

This is simply a savings account held by two or more parties, but there is an important advantage. Joint accounts multiply the FDIC insurance limit applicable to the account (normally $250,000) by the number of owners of the account.

6. Student savings accounts

These are savings accounts some banks offer specifically for young people enrolled in high school or college, and they may feature more flexible terms such as lower minimum balance requirements.

7. Certificates of deposit (CD)

These are deposit accounts that require you to commit your savings for a specified period of time, which may be anywhere from one month to several years. In many cases, the longest CD term banks offer is five years. In exchange for that long-term commitment, you will typically earn a higher interest rate than on a savings account. However, unlike in a savings account, your money is not available any time you want it. If you withdraw from a CD before the specified term, you will typically have to pay a penalty.

8. College savings accounts (529 plans)

These are plans designed to pay for higher-education expenses, including tuition, fees and materials, and even room and board for students enrolled at least half-time. Contributions to 529 plans are not tax deductible, but they are allowed to grow tax-free and distributions from them are not taxable as long as they are used for qualifying educational expenses. A similar type of plan called the Coverdell Education Savings Plan can be used for grades K through 12 as well as for higher education, but contributions to these plans are limited to $2,000 a year.

9. Individual retirement arrangements (IRAs)

These allow you to deduct up to $5,500 a year (or $6,500 if you are aged 50 or older) for retirement savings. Investment earnings are tax free, though upon withdrawal distributions are subject to ordinary income tax. If you withdraw money before age 59 1/2, you will pay a 10 percent penalty in addition to the ordinary income tax rate.

10. Roth IRA

These are subject to the same contribution limits as traditional IRAs, but contributions are not tax-deductible. Instead, you get the benefit on the back-end of distributions not being subject to income tax.

11. 401(k) retirement plans

These are employer-sponsored plans that allow you to defer up to $18,000 (as of 2015) of your income pre-tax for retirement savings. These plans also often feature an employer match of some of your contribution to your 401(k) retirement savings plan, and your earnings are able to grow as tax-free savings. Distributions from these plans are subject to income tax, and there is a 10 percent penalty for withdrawals before age 59 1/2.

12. Health savings accounts (HSAs)

These allow you to make tax-deductible contributions, grow your money tax-free, and pay no tax on withdrawals as long as they are used for qualifying medical expenses. However, you have to be enrolled in a high-deductible health plan to participate.

Which one is right for you? It depends on the situation. Most likely, you will eventually find yourself using a few of these savings accounts at the same time, each geared to a specific purpose. The important thing is if you are looking for ways to save money, there is no shortage of good ways to do it.

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