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Having savings is a cornerstone of personal finance, as saved cash can help you achieve your money goals as well as save you from debt when you have an unplanned expense.
Let's take a closer look at high-yield savings vs. money market accounts, and learn how to decide which is best for you.
Here's a basic overview of the features of high-yield savings accounts and money market accounts.
A high-yield savings account is a deposit account designed to hold your money for near-term spending. They're user-friendly, very easy to open, and you can add as much money as you want to one. Most banks offer a savings account option, but not all of them are "high yield."
A high-yield account specifically offers an APY (annual percentage yield) that is more competitive than that of a standard savings account, and thanks to the Federal Reserve's recent interest rate hikes, the rates on these accounts just keep jumping.
Look to an online-only bank for the best APY. Savings accounts are not designed for frequent withdrawals, and may be limited to six or fewer "convenient" transactions per month under Regulation D. Some banks suspended this rule due to COVID-19, but it's worth checking if the bank you're considering still enforces it.
Make sure you're getting the best account for you by comparing savings rates and promotions. Here are some of our favorite high-yield savings accounts to consider.
Account | APY | Promotion | Next Steps |
---|---|---|---|
Open Account for SoFi Checking and Savings
On SoFi's Secure Website.
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
up to 4.60%²
Rate info
You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.
Min. to earn: $0
|
New customers can earn up to a $300 bonus with qualifying direct deposits!¹
|
Open Account for SoFi Checking and Savings
On SoFi's Secure Website. |
Open Account for Citizens Access® Savings
On Citizens' Secure Website.
Rating image, 4.00 out of 5 stars.
4.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
4.50%
Min. to earn: $0.01
|
N/A
|
Open Account for Citizens Access® Savings
On Citizens' Secure Website. |
Open Account for NexBank High-Yield Savings Account from Raisin
On Raisin's Secure Website.
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
5.26%
Min. to earn: $1
|
N/A
|
Open Account for NexBank High-Yield Savings Account from Raisin
On Raisin's Secure Website. |
A money market account is another type of deposit account offered by many banks. They're sort of like a hybrid cross between a savings account and a checking account, in that many of them come with a debit card and/or check-writing privileges.
Money market accounts often have similar APYs to high-yield savings accounts, and they may also be subject to limited withdrawals, like savings accounts.
Let's say you've got an emergency fund saved up and you're looking for a new bank account to keep it in, because your old savings account at a brick-and-mortar bank just isn't cutting it anymore, interest-wise.
Here's what to consider when choosing between a high-yield savings account and a money market account.
We always hope that we don't need money due to an emergency, but if life has taught me anything, it's that expensive emergencies are always a possibility. As a result, you need easy access to your emergency fund, whether that's the ability to take money out of an ATM, write a check, or use a linked debit card to pay a bill.
While both types of accounts may limit the number of transactions you can make, money market accounts offer check-writing privileges and often come with a debit card. This means you don't need to take any additional steps to access your money.
A high-yield savings account, on the other hand, may or may not come with an ATM or debit card; you may need to link a checking account and then transfer money over to it to be able to withdraw cash or make purchases. If that checking account is with a different bank, it could take a few days to get your money.
Advantage: Money market account
One of the nicest features of high-yield savings accounts is that many of them have no minimum balance requirement to either open or maintain the account. While you want to keep money in it, and ideally add more money over time, if you need to tap your emergency fund for a bill and end up with a low balance remaining, you won't be charged fees on your savings account.
Money market accounts, on the other hand, may have a minimum balance requirement that you'll need to maintain, or even a substantial starting balance requirement to open the account. So depending on how large your emergency fund is, you may not be able to open the money market account with the highest APY.
Advantage: High-yield savings account
Whenever you put money into a bank account of any type, you want to know your money is safe and you're not at risk of losing it. The good news is that both high-yield savings accounts and money market accounts fall under the jurisdiction of the FDIC.
The Federal Deposit Insurance Corporation is an independent wing of the federal government, and is tasked with insuring deposits in checking, savings, money market, and CD accounts. To double-check whether your bank is part of the FDIC, you can look it up using the BankFind Suite tool.
Any amount of money up to $250,000 per account holder (this means that joint accounts get up to $500,000 in protection) kept in these accounts will be returned to you if your bank fails. And if you have these accounts with a credit union instead of a bank, the NCUA (National Credit Union Administration) has your deposits covered.
Advantage: Tie
The key differences between money market accounts and high-yield savings accounts are their access to money and minimum balance requirements.
So which should you choose? Take these steps to decide:
Whichever you choose, both high-yield savings accounts and money market accounts offer you the chance to store your money with no risk. Plus, you get ample opportunities for reward in the form of compound interest.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's top savings account picks can earn you more than 10x the national average savings account rate.
The APYs on savings and money market accounts are variable, which means the banks that offer them can raise and lower them at will. Rates are still high (as of spring 2024) because of the higher federal funds rate. When the Fed cuts rates, the APYs on these accounts will likely fall.
Yes, savings and money market interest is taxed like regular income. You'll receive a 1099-INT from your bank, reporting how much interest you earned during the year, and use this when you file your tax return.
Experts generally recommend saving three to six months' worth of expenses in your emergency fund. This amount of money can cover you in case you lose your job, but it can also help you cover many unplanned bills without resorting to debt.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.