How do I: Choose a savings vehicle?

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Topic: Checking & Savings
Who is affected: Consumers at any life stage
What you’ll need: Bank statements

What you need to know

People looking for a safe place to stash their money have many options from which to choose. How can they know which type of savings account is right for them?

The first step is to learn about savings vehicles so you can make educated decisions. Consider the level of access you’ll need to your stashed cash — this is called liquidity. Do you need the ability to tap the money at a moment’s notice, or can you wait for a period amount of time?

Also, consider how much money a savings vehicle will earn. Safer vehicles often earn less, while riskier ventures usually yield higher profits. Finally, will your money be insured?

Here’s a quick breakdown of popular savings vehicles.

Key characteristics of popular savings vehicles
Type Liquidity Yield Safety
Statement savings account High Lower Insured
Money market account Partial Higher Insured
Money market mutual funds Partial Higher Uninsured
CDs With penalty Higher Insured
529 accounts Highly restricted Higher Uninsured
Savings bonds Restricted Moderate Insured
Treasuries Restricted Moderate Insured
Choosing the right type of savings account is the first step on the pathway to financial security. How long will it take you to become a millionaire? Use this calculator to find out:
Initial amount:
Monthly deposit:
Average annual return:
Average annual inflation:

Retirees often are best off choosing a vehicle that offers minimal risk, as they usually need the money sooner.
Younger investors may flirt with riskier vehicles — especially if they’re working with money that they won’t be using for a long time.
529 accounts are a good idea for almost anyone with kids. They’re like an IRA for your child’s college tuition.