When you walk into a or , you'll be offered several types of accounts. Here's what each one does.
Checking Account
Purpose: Everyday spending
Your is your financial home base. Money comes in (paychecks), money goes out (bills, spending).
Features:
- for purchases and ATM access
- Unlimited transactions
- Often no or low
- May have monthly fees (avoid these!)
You need this: Yes, everyone needs a checking account.
Savings Account
Purpose: Storing money you don't need right now
Your is where you keep your and short-term savings. Money earns while it sits.
Features:
- Earns interest (amount varies widely)
- May limit withdrawals to 6 per month
- Separate from checking to reduce temptation
- insured up to $250,000
You need this: Yes, for your emergency fund at minimum.
High-Yield Savings Account
Purpose: Maximizing interest on your savings
A works just like a regular savings account but pays 10-20x more . Usually offered by online banks.
Features:
- of 4-5% vs 0.01% at traditional banks
- Same insurance protection
- Online-only (no physical branches)
- Free transfers to your main bank
You need this: Highly recommended for your .
Money Market Account
Purpose: Hybrid of checking and savings
Higher interest than checking, more access than savings. Often requires higher minimum balances.
You need this: Optional—a usually works better.
Certificate of Deposit (CD)
Purpose: Locking in an
You agree not to touch your money for a set period (3 months to 5 years). In exchange, you get a guaranteed rate.
You need this: Optional—useful for money you know you won't need.
The Essential Setup
For most people, you need just two accounts:
- Checking account at a convenient bank (for daily spending)
- High-yield savings account at an online bank (for emergency fund + goals)
That's it. Don't overcomplicate it.