What is a savings vehicle?

Saving money can feel a lot like raising kids—well, with fewer grass stains. You want them to succeed and hit milestones without running into problems. So when it comes to choosing the best way to grow your hard-earned savings, you want to know all your options.

If you’ve ever wondered: What is a savings vehicle? Are they traditional savings accounts? Don’t worry, you’re not alone. There are many types of savings vehicles and by understanding each, it can help you choose what’s best for you and your savings goals.

Three major examples of savings vehicles are savings accounts, money market accounts (MMAs) and certificates of deposit (CDs). They all have their own benefits and restrictions and knowing the details of each can help you choose what’s right for you.

And if you’re wondering: Are savings vehicles insured? Most of the time, yes. The Federal Deposit Insurance Corporation (FDIC) generally insures up to allowable limits, which can help protect your growing funds.¹

If you’re considering setting aside some money, opening a savings account can be a great way to get started. They generally require lower initial deposits and offer more accessibility than CDs.² However, they usually have lower annual percent yields (APYs) meaning you’re likely to see a smaller percentage of growth in your account than you might with other options.² This type of account can be great starting point for someone looking to save.

Money market accounts are unique savings options that, depending on your bank, might require a higher deposit than a typical savings account.³ But with a higher minimum can come higher savings rates. These accounts may offer flexibility and access to your money via a debit card or physical checks.⁴ And the higher rates may help you hit your savings goals faster.

Certificates of deposit are savings accounts that allow owners to save a fixed amount of money at a fixed interest rate for a fixed amount of time, called a term.⁵ Terms often last six months, a year, five years or longer.⁵ For some, the fixed rate is a plus. You don’t have to worry about your interest rate if the market dips. And while the rate doesn’t generally increase if the market booms, CDs offer predictability that can help you better plan future savings goals. Unlike savings accounts and MMAs, CDs usually don’t let you access your money without a penalty fee.

But, if you are looking to stop dipping into your savings or are already good about budgeting, a CD could be an option to consider. In exchange for not being able to access these funds for an agreed-upon time, the bank usually rewards you with a higher APY than typical savings accounts.⁵ At the end of the term, you have the option to take your money out and put it toward future plans, or you can put it right back into another CD or other savings vehicle.

Savings accounts, MMAs and CDs are three common savings vehicles, but there are plenty of variations:

• Joint savings account: A savings account that's held by two or more parties. The benefit of sharing? Besides offering a great way to help build and mature your relationship, the FDIC will usually increase your insurance limits.¹
• Student savings account: Created especially for students, these accounts generally offer more flexibility when it comes to initial deposits and minimum account balances.⁶
• Automatic savings plans: While not a type of account, automatic savings plans are an account feature offered at many banks.⁷ You can use them to transfer a certain amount of money from your checking to your savings on a weekly or monthly basis.

Knowing your future savings goals will help you make the most out of your savings vehicle. If you are looking for faster growth, you may decide to choose an account with a higher APY, like a CD or MMA. No matter which you choose, finding the right savings account for your specific funds can help you become better at reaching (and exceeding) your goals.

From investing for your family's future to saving for your next vacation, you want your money to work as hard as you do. Making the most out of your savings account depends on your finances, how much you want to save and your flexibility. Once that's figured out, you can sit back, relax and watch your savings grow!

If you’re still unsure of which plan would work best for you, it may help to go online and read more about your bank’s specific savings vehicle options. Understanding your savings options might help you feel more confident and ready to help your savings account succeed. Because, just like when you’re raising kids, you want your savings to do the best they can.