Schwab MoneyWise ®
Schwab MoneyWise®

Choosing the Right Accounts

What accounts are right for you?

Our Two Cents

Checking and savings accounts are accessible, safe places to keep your money, but they will not grow your wealth significantly.

Saving and investing are easier and more convenient with the right accounts. These can range from basic savings, checking, and brokerage accounts to specific accounts for retirement or for your kids. It's a good idea to learn about what's available and how each account can help you reach your goals.

Savings accounts

A savings account is a good way to start putting money aside for your goals. You can open a savings account at a variety of financial institutions, including commercial banks, savings and loan associations, and credit unions. You can deposit as much as you like in a savings account. Your money is FDIC-insured up to $250,000 per account holder, per bank.

With a savings account, you also have the opportunity to earn interest—expressed as annual percentage yield (APY).

Important things to consider:

  • Interest rates, benefits, and terms of savings accounts vary from institution to institution as well as from account to account, so be sure to compare rates and fees before opening one.
  • Some accounts require a minimum balance and have limits on withdrawals, payments, and transfers, while others charge fees.
  • Think of a savings account as a place to safely park your money, and a checking account as a place from which to easily retrieve it. However, neither is a place to grow your wealth.

Checking accounts

Most banks, savings and loan associations, and credit unions also offer checking accounts. These accounts give you flexibility in depositing and withdrawing your money. As with savings accounts, there's no limit on how much you can deposit in a checking account. And your money is FDIC-insured up to $250,000 per account holder, per bank.

Important things to consider:

  • As with savings accounts, the terms and conditions of checking accounts can vary from bank to bank. Sometimes a single bank will offer more than one type of checking account. As you compare banks and types of accounts, pay special attention to minimum balance requirements, fees, and limits on checks and ATM withdrawals.
  • Some checking accounts offer interest on the money deposited.
  • Many checking accounts offer overdraft protection, though this can be tricky. If you regularly spend more than what is in your checking account, you could quickly chip away at your savings.
  • Checking your balance online or through apps can help you be aware of how much you have to spend.

Money market savings accounts

This is a high-yield, FDIC-insured bank account. Interest rates for money market accounts are typically higher than those on interest-bearing checking accounts.

Important things to consider:

  • Withdrawals from money market accounts are usually limited to six per month, three of which can be made by check.
  • Often a high minimum balance must be maintained to avoid fees.
  • A money market account is not the same as a money market fund; the latter is a type of mutual fund.

Brokerage accounts

This is an account through a brokerage firm that holds your investments and allows you to buy and sell securities such as stocks, bonds, mutual funds, and exchange-traded funds. Cash not invested is generally held in a money market fund.

Important things to consider:

When choosing a brokerage firm, keep in mind that you're not choosing a person, you're choosing a professional firm. Don't base your decision on a specific broker. Rather, look at the firm's reputation and breadth of services. If you're interested in investing online, check out a potential broker's site for the services, technology, and level of security it offers.

Retirement accounts

When it comes to saving for retirement, there’s nothing like a tax-advantaged account. Not only will your earnings grow tax-free, but you may also be able to deduct your contribution from your taxable income. Add the power of compounding, and you have an effective formula for growing your savings.

Types of retirement accounts

There are several types of retirement accounts, each suited to a different personal scenario and need:

Whichever type of retirement account works best for you, make a commitment to saving as much as you can each month and stick with it. A helpful way is to make retirement savings part of your budget.

Accounts for kids

The type of account you choose for a child will depend on your goals. If you want to give a gift of money to a minor—and introduce them to the world of investing—a custodial account can be a good choice. A custodial Roth or traditional IRA can provide a way to give a child a head start on retirement, provided the minor has earned income.

If you want the money to help pay for a child's college education, two of the best choices are a 529 college savings plan or an education savings account (ESA). If your primary objective is to transfer a large amount of wealth to a child, the best solution is a trust.

Which type of account is right for you?
If you want to… Then consider…
Start saving and investing for a child’s education. A 529 plan or an education savings account.
Give a child a gift of money while also teaching investment skills. A custodial account.
Help a teen (who has earned income) start saving for retirement. A custodial Roth or traditional IRA.
Transfer a significant amount of wealth to a child. A trust—we recommend that you consult with an attorney.

Keep learning

Now that you have basic accounts down, think about how you can grow your wealth through investing.


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Investing involves risk, including possible loss of principal.

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