I'm Saving for a House. Here's Where I'm Keeping My Money

There's a whole wide world of financial accounts out there, and if you're saving for a big goal, you might wonder which one is best for your money. For the last eight months, I've been putting money aside to buy a home in the near future. I'll need to cover a down payment, a home inspection, closing costs, and likely other expenses along the way to becoming a homeowner. Plus, I want to leave myself with some cash left over, in case I want to make immediate improvements to my new home or something breaks right away.

I could've opened a brokerage account for the money. A money market account was also a possibility. And I could've even opened a certificate of deposit (CD) account. Ultimately, I didn't choose any of these, though. Here's why I opted for a high-yield savings account instead.

Savings accounts are safe

After a few extremely high-profile bank failures earlier in 2023, many people are nervous about banks and wonder whether their money is safe. A bank is a much safer place for your money than say, a jar buried in your backyard or under your mattress. This is predicated on whether your bank has FDIC insurance. If it does (and you can check here, using the FDIC's BankFind Suite tool), up to $250,000 of your money, per person, per insured account type (checking, savings, money market, CD), is covered. This means that if your bank fails, your money will be returned to you.

Invested money, however, is not protected from loss in the same way. If I invested my house money, I would be putting it at risk. Stock values fluctuate in the short term, and since I have less than a year's timeline for this money, investing it would be a bad idea. Now, if I was saving this money to retire on in a few decades, a brokerage account would be a good place for it, because I would have time to ride out the market's swings and benefit from many years of compound interest.

Savings accounts make money management easy

My savings account is extremely easy to use. It's at a different bank from my main checking account, but I can use a payments app to send money to it easily, any time I want. If I had opted for a CD, I wouldn't have this flexibility to add (and remove) money anytime. With a CD, your money is locked in for the term length, and you can neither add more nor withdraw without a penalty.

My account has some neat tools that make saving, dare I say, more fun? It gives me the option to create "buckets" within the account, which means I can not only track the progress of saving for a home, but I can also keep my quarterly tax payments separate from it and save for smaller goals, like travel.

Savings accounts can help your money grow

I opened my savings account at an online-only bank, because it pays a higher APY than brick-and-mortar banks. This is because online banks don't have physical bank branches to maintain, so they can pass on those savings to account holders. My account's APY has risen multiple times since I opened the account last spring, and it's currently 4%.

I have a savings account at the big national bank I've been with since college, but my APY on that account is only 0.02% as of my most recent statement. That's why I keep the bare minimum balance in that account, to keep me from paying maintenance fees and so I have a few hundred dollars in case of emergency or an accidental overdraft on the checking account linked to it.

Money market accounts pay a generous APY too, but they sometimes come with a minimum balance requirement to avoid a maintenance fee or earn the highest APY available. Ultimately, I can earn a comparable APY on my savings account, with no risk of paying fees.

Any way you slice it, a high-yield savings account is the perfect place for my house fund. It's also a great place to keep your emergency fund and a nice way to introduce kids to banking and saving money. If you haven't considered your high-yield savings account options lately, I encourage you to do so -- you can get a high APY, convenience, and safety.