What Is the Best Savings Account Based on Your Age?

As we go through each decade of our lives, our financial goals and needs change. During your twenties and thirties, you may be focused on growing your career and saving for a house. In your forties and fifties, your attention will likely shift to wealth accumulation and retirement. As a result, you may need to incorporate different savings vehicles into your financial plans as you grow older. To help you better manage your finances during each unique stage of your life, let’s take a closer look at the best savings account based on your age. 

Best Savings Account Based on Your Age

College Students 

College students are usually living on a tight budget and don’t have much money to set aside in their savings accounts. That’s why student savings accounts are a great option for you if you’re still in school. 

Student savings accounts usually have limited fees, so you won’t have to waste your hard-earned money on banking costs. These accounts also have a low minimum deposit or no minimum at all, allowing you to open an account with whatever spare cash you have on hand. You may even be able to set up direct deposit for your student loan money, enabling you to save whatever’s left over after you pay for tuition and buy books. 

In Your Twenties 

As a twenty-something, you’re always on your phone, so it’s best for you to bank with an online financial institution like Ally or SoFi. Because online banks don’t have physical locations or much overhead, they’re usually able to offer better APYs on their savings accounts, enabling you to grow your savings. 

Plus, online banks usually have top-notch digital tools to help you maximize the amount you’re putting into savings every month. Ally, for example, allows you to set up recurring transfers to your savings account, round-up your purchases, and enable the “surprise savings” feature. This automated tool analyzes your checking account to detect untouched funds and transfers them to your savings account so you aren’t tempted to spend them. 

Since online banks are often geared toward twenty-somethings, they may have exclusive member benefits you’ll appreciate. For instance, SoFi offers one-on-one career coaching to account holders free-of-charge, which can help you climb the career ladder and increase your income.

In Your Thirties 

Your thirties are usually a big decade financially. Many thirty-somethings get married, buy a home, and start having children all in the span of a few years. As a result, you can’t have your money tied up in CDs. You’ll need constant access to your wedding or down payment fund so you’re ready to put down a deposit on the right venue or home at a moment’s notice. 

That’s why a money market account is the best savings account based on your age. Unlike CDs, money market accounts don’t limit your access to your funds. They provide the liquidity you need while also offering higher APYs than regular savings accounts, which can help protect the purchasing power of your funds. 

Keep in mind that money market accounts usually have higher minimum deposits than regular savings accounts. But you probably have at least a few thousand dollars tucked away by now, so that shouldn’t be a problem for you. 

In Your Forties and Fifties

If you’re in your forties and fifties, you’re probably in your peak earning years and focused on wealth accumulation and investing. For that reason, a cash management account is likely to be the best savings account based on your age. 

Cash management accounts are online bank accounts offered by many investment brokers and robo-advisors. They provide many of the same benefits as high-yield savings accounts, such as high APYs, low fees, and FDIC insurance. 

Since cash management accounts are linked to your brokerage account, they make it easy to invest any extra money that’s left over at the end of the month. They may even have features to help you invest more money and reach your financial goals, such as automatic round-ups on your purchases that are transferred to your investment account. 

In Your Sixties and Beyond 

In your sixties and beyond, your main focus will be preparing for retirement. So the best savings account based on your age is a certificate of deposit. Building a CD ladder can help get you ready for retirement by ensuring you have the income you need regardless of the market’s performance. 

Pulling funds out of your retirement accounts during a down market can hurt the long-term performance of your portfolio, especially in the first few years of your retirement. That’s why many experts recommend you keep one or two years of living expenses in cash. 

Instead of keeping your cash in a regular savings account, you can earn more interest on your money by building a CD ladder. This involves purchasing several CDs with staggered maturity dates (six months, twelve months, eighteen months, and so on). 

When a CD reaches maturity, you can spend it if the market is down and you can’t pull from your retirement accounts. But if the market is doing well, you can reinvest that cash in a CD with a far-off maturity date to continue the ladder so funds are available should you ever need them in the future.

Which type of savings account do you prefer? Share your thoughts in the comments section below! 

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