Best savings accounts for different age brackets

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Growing up and growing your savings © zimmytws -

Depositing money into a savings account is only the first step toward personal finance empowerment. The fees and features of that account are equally important to your saving strategy. As the year begins, you should think about where your savings are and how they might best work for you, no matter what your age.

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"Regardless of what age bracket you fall into, make sure your savings account fits your individual needs and that you're getting the best return on your money," says Greg McBride, CFA, senior vice president and chief financial analyst at Bankrate.

Those individual needs can vary as you get older. Whether your child is starting the first day of elementary school or you're starting your first day of retirement, here's a look at the best savings accounts based on age.

Savers just starting

Savers just starting © bst2012 -
  • Age bracket: Toddlers to teens
  • Account: Basic savings account with a parent

Many banks offer low-cost or free savings accounts for minors that allow parents to guide their children through the basics of smart money management. The accounts typically require a parent or guardian to open the account in the child's name and allow the adult to show the child or teen how saving works.

While personal finances may not be the first thought on a preschooler's mind, it's never too early to teach children about the importance of paying themselves first, says Erin Constantine, executive vice president of consumer deposits for Wells Fargo.

"It's important to incorporate an automatic savings plan from an early age," Constantine says.

That plan can be as simple as automatically transferring $1 from a monthly allowance into the child's savings account. Constantine says those little lessons can make a big difference down the road.

The tech-savvy crew

The tech-savvy crew © drubig-photo -
  • Age bracket: 20-somethings
  • Account: Online savings account

As an emerging generation of savers becomes more tech-savvy, online-only banks, also known as direct banks, offer savings accounts that give account holders a place to grow their money without having to go to a physical banking location.

"Many millennials will only ever bank online and via their mobile devices," McBride says. "They may never go into branches."

That lack of branch interaction can reward 20-somethings with more than a digital banking experience. Andrea Puchalsky, spokeswoman for Ally Bank, says direct banks do not have the same overhead costs as traditional bank branches. Lower costs allow direct banks to offer perks such as no minimum balance requirements and no monthly maintenance fees.

On the road to bigger decisions

On the road to bigger decisions © goodluz -
  • Age bracket: 30-somethings
  • Account: Brick-and-mortar money market savings account

Savers who are on the path toward making bigger decisions about what to do with their money may want the ability to go beyond an online relationship with their banks.

"Having the ability to go into your local branch and talk to a banker remains an important part of personal finance planning for many consumers," Constantine says. "A lot of people want the ability to have a face-to-face conversation with an expert."

Constantine says mature savers should consider how they will use their tax returns or annual bonuses to help accelerate saving toward bigger items, such as a new home or a college education.

Many traditional banks offer money market savings accounts that reward consumers with higher interest rates based on the balances of their deposits. Those tax returns and bonuses can help account holders reach higher tiers of interest potential.

The mature crew

The mature crew © goodluz -
  • Age bracket: 40- and 50-somethings
  • Account: High-yield savings account

As savers mature, Constantine says it's important to consider more than automated transfers into a standard savings account.

"Fast forward into your 40s or 50s, and it may be time to think about moving into an account with a higher interest rate," Constantine says.

"Every few basis points make a difference," McBride says.

The national average annual percentage yield, or APY, for savings accounts is 0.1 percent, according to data, but some online banks offer rates approximately nine times higher than the average. As you move closer to retirement, that accelerated earning potential can help increase your liquid savings cushion.

Senior savers

Senior savers © michaeljung -
  • Age bracket: Retirees
  • Account: Online IRA savings account

Millennials may be known as the tech-savvy generation, but more and more seniors are starting to see the benefits of an online savings account.

"The notion that retirees are sticklers for a local branch presence is highly overrated," McBride says. "Online is the preferred channel for banking interaction across all age segments."

Online banks have recognized that seniors want tech-savvy saving solutions, too, and some Internet-based institutions offer individual retirement accounts, or IRAs, to keep retirement savings safe while helping account holders earn higher interest rates on their low-risk savings.

"Having a competitive earning potential on the cash account within the IRA can be very important to retirees," McBride says.


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