7 Places to Save Your Money

1. High-Yield Savings Account (HYSA)

A high-yield savings account allows your money to earn a higher-than-average interest rate while it's sitting in your account. You'll have easy access to your funds, which could come in handy if you need cash quickly, and your money is also insured for up to $250,000 if kept at a covered bank or credit union. That makes it a low-risk savings vehicle. For these reasons, a high-yield savings account is an ideal place to keep your emergency fund or money you're squirreling away for short-term goals.

But a high-yield savings account usually doesn't make sense for long-term goals like retirement. Despite HYSAs' attractive rates, annual percentage yields (APYs) typically lag behind historical stock market returns.

Tip: Online banks offer some of the best high-yield savings accounts. They tend to offer better rates than brick-and-mortar institutions due to their lower overhead.

2. Employer-Sponsored Retirement Account

If you have access to a workplace retirement account, such as a 401(k), it could provide an easy way to save for your future. This type of account offers unique benefits that are hard to beat:

• Your contributions reduce your taxable income. That, in turn, can reduce how much you owe in taxes each year.
• Saving is automatic. Contributions to your 401(k) are typically made through automatic payroll deductions, making it easy to save for the future.
• Your money grows tax-deferred. You won't pay taxes until you make withdrawals in retirement.
• You might be eligible for a 401(k) match. This is when your employer contributes to your account on your behalf.

But there are some drawbacks to consider. Employer-sponsored accounts like 401(k)s come with contribution limits and early withdrawal penalties. You also have to start taking required minimum distributions (RMDs) beginning at age 73.

Tip: Contribute at least enough to your retirement account to secure an employer match if one is available to you. It's essentially free money.

3. Individual Retirement Account (IRA)

An IRA is a retirement account you can open and fund on your own, apart from your employer. There are several different types of IRAs, and each one has its own tax benefits. Two of the most common are:

• Traditional IRA: Contributions to a traditional IRA can be tax deductible, and like a 401(k), your money will grow tax-deferred until you make withdrawals in retirement. Contribution limits, RMDs and early withdrawal penalties apply.
• Roth IRA: These accounts are funded with after-tax dollars, so you can't deduct your contributions on your tax return. But money in a Roth IRA will grow tax-free, and you can withdraw your contributions at any time, tax- and penalty-free. Income limits apply, so you may be restricted from contributing the full amount.

Tip: You can open an IRA with an online broker, robo-advisor, bank or credit union, then set up automatic monthly contributions from your checking account.

4. Health Savings Account (HSA)

An HSA allows you to set money aside on a pretax basis. You can then draw on those funds to cover qualified medical expenses, such as copays, deductibles and other health-related costs. HSAs offer three main tax advantages:

• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals if the money is used to pay for qualified expenses

When used strategically, an HSA can help reduce your out-of-pocket medical costs, but you must be enrolled in a high-deductible health plan to qualify. Annual contribution limits apply.

Tip: Once you turn 65, you can use HSA funds for whatever you like—including retirement income. Just keep in mind that you'll be taxed on withdrawals that aren't used for qualified medical expenses.

5. Certificate of Deposit (CD)

A CD is a type of savings account that has a specific term length. Once the account matures, you'll get back your opening deposit along with any interest you've earned. The main draw is that APYs are typically much higher than rates on traditional savings accounts. For this reason, it could be a great savings vehicle if you're looking for a low-risk place to park a portion of your cash savings.

But be prepared to give up access to your money until the account reaches maturity: Most CDs charge an early withdrawal penalty if you tap your funds before the term ends. In some cases, the penalty could equal six months' worth of interest.

Tip: Consider a CD ladder. This is when you open several CDs that have different term lengths, allowing you to access waves of money on a recurring basis. Common CD terms include: three months, six months, one year, three years and five years.

6. Money Market Account

A money market account blends features of a savings account and a checking account. Your money will earn interest, and you can add to your account whenever you like. But most accounts also come with a debit card or checkbook, making it easy to withdraw funds as needed.

There's usually a cap, however, on how many convenient withdrawals you can make each month. For example, you might only be able to make six debit card transactions before being charged a fee. You might also have to maintain a minimum balance to avoid fees.

Tip: Some financial institutions require a minimum deposit to open a money market account. Shopping around and comparing banks and credit unions can help you find the best money market account for your needs.

7. Brokerage Account

A brokerage account is an investment account that can give you direct access to securities like:

• Stocks
• Bonds
• Mutual funds
• Exchange-traded funds

You can open and fund the account with an online brokerage, then make trades as you see fit. That might be something you do yourself or outsource to a robo-advisor or broker. There are no contribution limits with a brokerage account, and you can access your money whenever you like. And unlike tax-deferred retirement accounts, there are no contribution limits or required minimum distributions.

Just be aware that you'll be taxed on investment gains during the year they're realized. Stock investing also carries more risk.

Tip: Because brokerage accounts don't offer tax advantages, they aren't the best place to build your retirement nest egg. But it might be a good way to grow your wealth and diversify your investment portfolio.

Frequently Asked Questions

The Bottom Line

You can keep your money in a variety of accounts based on your savings goals and when you plan on using the money. For example, you might keep your emergency fund in a high-yield savings account while saving for retirement through a 401(k). Meanwhile, you may use a CD to save for a specific financial goal with a particular end date, such as buying a house in five years. Let your objectives and timeline be your guide.