The best savings accounts depending on the term: short, medium or long

You should also be clear about your goals and if you want easy access to your money.

When selecting a savings account it is important to consider the period of your goals, whether they are short, medium or long term. In the market there are certificates of deposit (CD), money market accounts, cash management accounts, investment accounts and the basic savings accounts to put your money.

But annual rates of return are not the only parameters to choose the best savings account for you . You should also consider if you will have access to cash or until when this would be possible, maintenance fees, if any, and the fines you could incur for withdrawing money before the period of your contract.

What is the best short-term savings account?

These types of terms are perfect for when your plan is to save for a vacation, create an emergency fund or a personal or family project . In that sense, it is important that you can have free access to your cash or that your terms are not as broad as in:

  • A high yield savings account. According to Nerdwallet, online banks often offer you higher interest rates than traditional banks. Although the return is lower, with these accounts you usually have fast and free access to your cash.
  • Money Market Account (MMA). These accounts typically offer paper checks or a debit card, and their rates are often similar to savings accounts.
  • Cash Management Account (CMA). These accounts are offered by brokerages instead of banks and have competitive interest rates.

What is the best medium-term savings account

Specially designed for larger life projects such as a stronger emergency fund, a wedding, the purchase of a car, a down payment on a house , among others, which can take more than a year to obtain the desired amount. To gain a little more interest you can think about:

  • High Yield Savings Account. As for short-term goals, these types of accounts are also good for the medium term.
  • Certificates of Deposit (CDs). If you are clear about when you need your money by, say two years from now, then CDs may be best for you. You earn higher interest in the period you prefer because you do not have access to your money until it is fulfilled. If you want the money before that time, consider that you will have to pay an early withdrawal penalty.

What is the best long-term savings account?

For a good retirement or a plan for your child’s university, due to its characteristics, you need to think about a long-term savings account, but what can it be? Here the answer:

  • Investment account. Over a long period of time, invested cash tends to earn a higher rate of return compared to other types of savings. 401(k) plans or individual retirement accounts (IRAs) are the best option for you. In the case of a university account, there are 529 savings plans. If none of these are your plans, but you simply want to make your money grow without time pressure, there are other types of investment accounts that have their own characteristics and risks to consider.

If you are clear about your objectives, you will know perfectly what type of savings account is the best for you. The important thing is that you always include in your budget a part of your income destined for this aspect.