There are lots of reasons to make saving money a priority. Responsible saving is one of the sound financial habits that can help everybody prepare for their financial future. But while saving is essential, there’s no one strategy that works for everyone. Various factors, including your age, financial goals, income, and living expenses all play a role in your financial planning.
At Leaders Credit Union, we work with our members to help them turn their financial dreams into reality. That’s why we’ve created this guide to seven types of savings accounts for different financial life stages. With the right accounts at the right times, you can live a comfortable life with minimal financial concerns.
How Do Different Life Events Influence the Choice of a Savings Account?
Before we explain the various types of savings accounts to consider at each life stage, let’s look at how life events could potentially influence your choice of savings accounts:
- Going to college might require you to get a savings account with tiered dividends or interest rates to help you fast-track your savings as you prepare for adult life.
- Getting married might mean opening a joint savings account to pursue shared savings goals.
- Having kids might require you to start saving for their college education.
- Buying a house might mean that you need to add to your emergency savings account to cover your monthly expenses if you run into any unexpected home repairs.
- Retiring requires you to have the right account to keep your Required Minimum Distributions (RMD) from retirement accounts accessible to you and earning a return.
Depending on where you are in life, your financial goals and requirements will change. It’s for that reason that you might need to consider something other than a traditional savings account.
7 Types of Savings Accounts to Consider Throughout Each Stage of Life
There are multiple different types of savings accounts that can help you navigate each life stage throughout your financial life cycle, from learning about money management to retirement planning. Keep in mind that each of these is a dividend or interest-bearing account, but the amounts and conditions for each type will vary.
#1: Youth Savings
A youth savings account is designed for minors to help them learn about saving and spending. This type of savings account is a good place for kids to keep money from their allowance or from their birthday gifts.
The Leaders Credit Union account for kids is called Future Leader Savings. It offers a generous 5% APY1 for the first $500 in savings and offers rewards to kids who have perfect attendance or good report cards. The goal of this account is to encourage kids to get into the habit of saving, so they can be prepared for financial responsibilities in the future.
#2: Student Savings
For high school and college students who need guidance in starting to manage money, there are accounts that come with special features and an array of financial education tools to help them learn about saving and money management.
It’s important to note here that some financial institutions, including Leaders Credit Union, have an online knowledge base that includes financial articles, podcasts, videos, financial management tools, and more. iGrad is the tool exclusively for recent graduates, who can use it to manage their student loan payments, credit cards, and jump-start their investments for a financially healthy future.
#3: Traditional Savings Account
A traditional savings account is often offered (or even required) to open a checking account. For example, all new members at Leaders Credit Union are required to open a First Forward (Prime) Savings account.
Most traditional accounts have a minimum balance requirement to earn dividends or interest. The minimum balance for First Forward (Prime) Savings is just $10. As your balance grows, so do your dividends. This is a savings account to get you started and has its uses at every stage of life.
#4: Tiered Savings Account
A tiered savings account is ideal in young adulthood because it’s designed to help you accelerate your savings. These accounts offer the highest dividend and interest rates for new savers to help them build savings quickly.
The Fast Forward Savings account from Leaders pays a generous 5.00% APY1 to account holders on their first $5,000 of savings. It’s the ideal account to build an emergency fund or accelerate savings to buy a new car or a house.
#5: High-Yield Savings Account
A high-yield savings account (HYSA) is a type of savings account that offers higher-than-average dividend or interest rates. These accounts may come with a minimum deposit requirement, a minimum balance to earn dividends, and tiered dividend payments.
What sets a HYSA apart from an account designed to accelerate savings is that the highest dividend payouts go to the accounts with the largest balances. For example, the Forward Plus account is ideal for people who are financially secure and want to build their savings. It has no minimums, no balance tiers, and no requirements to earn dividends. You can earn 4.25% APY1 on your savings.
#6: Retirement Savings and Term Share Certificates
While a savings account for most of your retirement savings is not usually recommended, there are some accounts that can be helpful after you retire. Leaders offers IRA Term Share Certificates that can be used as short-term investment vehicles to grow your savings and be a part of your wealth management strategy.
At Leaders Credit Union, you can choose from a Traditional, Roth, or Education Savings Account. As you take your RMDs from retirement accounts, you can use a term share certificate if you don’t need the money immediately. You can earn up to 0.80% on certificates with 48-month and 60-month terms.
#7: Event-Specific Savings
There are some savings accounts that may be useful at any time of life, and here, we’re going to focus on two. The first is a vacation savings account, which may be useful if you’re planning a solo getaway or a family vacation. These accounts pay dividends and can help you save enough for your next trip.
Holiday savings accounts allow people to save money for holiday giving. You can automate savings and set money aside throughout the year, so you’re not overspending when the holidays arrive.
How to Choose the Right Savings Account for Your Financial Goals
Each one of our members is unique, but there are some general tips to help you choose the right savings account for different financial life stages:
- Evaluate your financial priorities. Your priorities may vary at different stages of life. For example, if you’re building an emergency fund, choosing an account that offers incentives for savings can help you maximize your earnings.
- Set savings goals. Saving money may be your goal but if you have something specific in mind, articulating it can help you choose the right account. You might choose a tiered account to jump-start your savings for a down payment on a house or a HYSA to keep the money in your emergency fund earning dividends.
- Work with a financial counselor. A counselor can help you evaluate your financial situation and make sure your priorities are serving your goals. This may include helping you navigate your savings account options and choosing the best account for your specific needs.
Any one of the savings accounts we’ve reviewed here could be right for you at the appropriate stage of life.
How Often Should I Review My Savings Strategy at Different Life Stages?
Your savings strategy can and should change as you move through various life stages. When you’re a young adult, you might need to prioritize student loan payments and financial stability before you pursue other long-term goals.
We suggest reviewing your savings strategy at least once a year. That said, we also think it’s a good idea to revisit your strategy as you experience major life events. If you get married or have kids, then you will need to think about what those changes mean for your short-term and long-term savings goals.
We’d be remiss if we didn’t mention retirement saving and how important it is to start saving early to take advantage of compound interest. If your employer offers a retirement savings plan such as a 401(k) or an IRA, we suggest taking full advantage of the plan itself and any employer matching contributions.
One final note: with certain types of retirement accounts, you’ll be required to make annual withdrawals from the age of 65 and on. However, there may be some exceptions. If you find you don’t need to spend the RMD, keeping that money in a savings account can help you in the future because you’ll earn dividends on your deposit.
Choose Your Savings Account with Leaders Credit Union
Choosing the right savings account at each stage of life can help you by maximizing your savings and by putting your money to work. It’s easier to achieve your most important financial goals and dreams if you’ve got the right tools at your disposal. The seven savings accounts we’ve listed here can all help those dreams come true.
Are you looking for a savings account to help you meet your financial goals? Leaders Credit Union has the account you need. Read about our savings accounts and become a member today.
