Long-Term vs Short-Term Savings Accounts

Banks offer a variety of saving accounts, each offering its own interest rates, benefits and disadvantages. Short-term saving accounts allows you to access your money when you need it, but there may be restrictions on when you can access your cash in long-term saving accounts, and how much you can take out at any given time.

Short-Term Savings Accounts

Checking and saving accounts are the two main short-term accounts offered to bank customers. The latter is not a popular choice because the amount of interest you can earn is low. Checking accounts are often a much better choice, because you can access your funds anytime through a ATM machine, and you can make online and offline purchases using the funds in your checking accounts. There are some high-yield bank accounts, but many are offered by online only banks, and you may prefer to bank locally.

Long-Term Savings Accounts

Money market deposit accounts and certificates of deposit are long-term savings accounts that offer higher interest rates than checking and saving accounts. With a money market deposit account, you're limited to the number of withdrawals you can make per month, and you may have to deposit $2,500 or more to open the account. You cannot access your funds in certificates of deposit (CDs) accounts until it matures, which is anywhere from 60 days to one year.

Beware of the financial penalties associated with withdrawing funds early from a long-term savings account, and the limited access to your money.  Short-term savings accounts may be the best option for business and personal use.

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