Choosing the Best Options for Your Savings Journey

In 2022, the United States ranked 34^th in the world for household savings, falling significantly behind Mexico, Canada, and the Eurozone.

This ranking is surprising when you consider some of the most common financial advice given is to save money. So why is the United States so far behind in saving?

One answer may be a lack of understanding of how to save or where to start.

Start Your Savings Journey Here

Saving money is like setting sail on a journey. You start by choosing where you want to go, then deciding the route you’ll take to get there.

Your savings goal is like your destination. You need to figure this out before you can start your journey. Need help coming up with a savings goal? Check out our free Savings Calculator.

Chart Your Course With the Right Savings Account

Choosing a savings account is like choosing the route you want to take to reach your destination. There are four common accounts used for saving money:

1. Certificate of Deposit Account (CD Account)
2. High Yield Savings Account
3. Money Market Account
4. Interest-Bearing Checking Account

Each of these accounts serves as a different route to get to your savings goals, but which ones fit your unique financial situation best?

Route 1: Certificate of Deposit

A certificate of deposit, or CD, is a type of savings account in which you deposit money and leave it, untouched, for a fixed period.

One of the primary benefits of this type of account is that it offers higher interest than other savings options because your money is locked in. However, the tradeoff is that you can’t use the money you’ve saved for the span of the CD; if you need to pull the money out early, you’ll likely be charged an early withdrawal fee.

Who is a CD best for?

CDs are great for someone who has a time-based goal but also has additional funds available if an unexpected expense comes up.

For example, meet Mary. Mary is 25 and wants to save for a down payment on a home. She has an emergency fund available to pay for unplanned expenses.

Because Mary has a large amount she needs to save, has a long-term savings goal, and won’t need to access the money, a CD account is a great option for her savings journey.

Route 2: High Yield Savings Account

A high yield savings account is a savings option that pays higher interest rates than a typical savings account.

The chief benefit of this account is that deposits can earn significantly higher interest without being locked down. So, if you need to tap into funds, you won’t be penalized for withdrawing money. This type of account typically has higher interest than the federal savings account average according to the FDIC.

Who is a high yield savings account best for?

A high yield savings account is generally best for people with long-term savings goals, because it typically has withdrawal limits. However, unlike a CD there is no penalty for withdrawing funds at a certain time.

Consider Eric’s scenario. Eric is 30 years old and wants to save for a car. He wants to earn a higher interest rate than a regular savings account typically offers, but he may need to access his savings at some point before he reaches his goal.

Eric decides to open a high yield savings account. He needs some flexibility and access to his money but intends to leave the funds alone for a long time, taking full advantage of a high interest rate.

Route 3: Money Market Account

This type of account, like a CD and high yield savings account, offers a higher interest rate than a typical savings account.

Unlike a CD and high yield savings account, a money market account provides greater money movement flexibility. Many money market accounts allow for several monthly withdrawals and lower minimum balances; however, these accounts may pay a lower interest rate than CDs or high yield savings accounts.

Who is a money market account best for?

A money market account is a good option for people with mid-length goals who need access to their money. Take Simon for example. Simon is 32 and owns a few rental properties. He wants to save for a trip, but he knows his properties often present him with unexpected expenses that may require extra funds.

Simon decides to open a money market account. He can earn interest on his money while maintaining the financial flexibility he needs for his rental properties.

Route 4: Interest-Bearing Checking Account

An interest-bearing checking account is accessible and can be withdrawn from at any time for any amount. The only restrictions may be maintenance fees or minimum balance requirements.

Because funds in this account are always accessible, an interest-bearing checking account pays a significantly lower average interest according to the FDIC.

Who is an interest-bearing checking account for?

An interest-bearing checking account would be great for someone like Julie. Julie is a university student who works part-time at a restaurant. Her parents say she should save money, but she doesn’t make enough to put away funds every month.

Julie decides to open an interest-bearing checking account so she can earn interest and still have full access to her money whenever she needs it.

The Vessel for Your Savings Journey: Choosing a Bank

In your savings journey, the bank you choose is like the vessel you use to reach your destination. Even if you take the same route, the experience may be very different using one vessel over another.

For this reason, it’s important to carefully consider which bank will give you the tools and features that you need to reach your goals.

At Axos Bank, we provide several savings options for you to start your savings journey such as:

• Certificates of Deposit (CDs) with a minimum deposit of $1,000.
• High Yield Savings offering up to 0.61% APY^*.
• High Yield Money Market featuring rates up to 0.25% APY^* and no minimum balance.
• Rewards Checking offering up to 3.30% APY^** and a $50 starting balance requirement.

X Marks the Spot: Reach Your Savings Goals

When it comes to saving, it’s best to determine your goals and decide how you are going to reach them first. Everyone’s financial situation is unique, so there will never be one solution that fits all.

However, if you carefully consider your financial needs and objectives, you can help to ensure that your savings journey will be a successful one.

Choosing the Best Options for Your Savings Journey

This blog was published by Axos Bank on December 20, 2023 and last updated on December 20, 2023.

^*The Annual Percentage Yield (APY) is accurate as of 12/20/2023. This is a tiered, variable rate account. The interest rate and corresponding APY for savings and money market accounts are variable and are set at our discretion. Interest rates may change as often as daily without prior notice. Fees may reduce earnings.

^**APY = Annual Percentage Yield effective as of 12/20/2023. The Rewards Checking Account allows you to control your interest rate reward based on the products/services used during the month. This is a tiered, interest-earning variable rate account. All daily collected balances up to and including $50,000 will earn interest based on the combined rate rewards. All daily collected balances greater than $50,000 will not earn interest. Your annual percentage yield can be as high as 3.30% based on the following combined rate rewards: direct deposits (not including intra-bank transfers from another account) totaling $1,500 or more each month will earn 0.40%. A qualifying direct deposit is required for the remaining interest rate qualifications to apply. Ten (10) point-of-sale transactions per month using your Rewards Checking Visa® Debit Card for normal everyday purchases with a minimum of $3 per transaction, or enrolling in Account Aggregation/Personal Finance Manager (PFM) will earn 0.30%; maintaining an average daily balance of at least $2,500 per month in an Axos Self Directed Trading Invest account will earn 1.00%; maintaining an average daily balance of at least $2,500 a month in an Axos Managed Portfolio Invest account will earn 1.00%; and making a monthly payment to an open Axos Bank consumer loan (commercial and business loans excluded) via transfer from your Rewards Checking account will earn a maximum of 0.60%. Limit of one Rewards Checking account allowed per customer. Qualifying transactions must post and clear the account during the monthly qualification cycle. Account transactions may take one or more business days from the transaction date to post to the account. At the time of your statement cycle date, we will determine the combined products and services used since the previous cycle date to determine the aggregate interest rate to apply to your current statement cycle. We will use the daily balance method to calculate the interest on your account. We may change the interest rate paid for products and services used and the annual percentage yield at the Bank's discretion any time without notice. Fees may reduce earnings.