High Yield Savings Accounts, CDs, And IRAs Explained: Which Should You Open?

CDS, IRA, and high-yield savings accounts each have their own unique set of pros and cons. CDs offer a guaranteed return on investment, high-yield savings accounts keep your funds liquid, and IRAs are great tools to prep for retirement.

By Iqra Butt | Published


With today’s prices, it’s beneficial to invest into your savings! Saving money is an essential part of personal finance, and there’s a few ways you can efficiently do just that. Let’s see how three common types of savings and investment accounts can help you.

High Yield Savings Accounts

A high-yield savings account is a type of savings account that offers a higher interest rate than a traditional savings account. The interest rate on high-yield savings accounts are influenced by your credit, your bank, and the market. You might benefit from this if you’re saving for a short-term goal, such as a house down payment or a vacation.


This type of savings account is typically offered by online banks, so it’s easy to get started. Next, your funds are fairly liquid, meaning they’re easily accessible if you need them. Lastly, in case of emergencies, your account is insured by the FDIC up to $250,000.


High-yield savings accounts may require a higher minimum balance requirement to open than traditional savings accounts due to their higher interest rates. Banks may limit the number of transactions per month from this account. Furthermore, they could penalize you for falling below minimum balance or exceeding transaction limits.

Certificate of Deposits

CDs are another type of savings account that generally offers a higher interest rate than a traditional savings account. However, CDs are fixed-term, meaning you won’t be able to access your money for a while. Investopedia believes this savings account is a good option if you have a lump sum that you won’t need immediately, like a college fund or retirement savings.


CDs are a great option because they offer higher interest rates than traditional savings accounts. Like the high-yield savings account, CDs are also FDIC-insured up to $250,000. They are regarded as a guaranteed return on investment.


As your savings grow, your funds are locked in for a fixed term. This means they are not very liquid. You will incur penalties for early withdrawal from this account. 

Individual Retirement Accounts

An IRA is a type of investment account designed to help you save for retirement. The IRS notes that there are two main types of IRAs, traditional and Roth, and both have their own specifications. IRAs are a good option for anyone who wants to save for retirement at any time, more so for those who don’t have access to an employer-sponsored retirement plan or for those who want to contribute more than the maximum allowed in their employer-sponsored plan to their savings.


You will receive tax benefits for your contributions and withdrawals. IRAs offer a range of investment options suited to your needs. Since it’s an investment account, there’s potential for high returns on savings over time.


While it is a great option, there are contribution limits to IRAs. Furthermore, since it’s generally for retirement, you’ll have limited access to your savings before retirement age. Resultantly, you will incur penalties for early withdrawal of funds. 


Overall, these three investment accounts can help you save for short-term and long-term goals. The best time to open each account depends on your financial goals and circumstances, but be sure to pay attention to the market as well. Lastly, do your research and consult with a financial advisor if you’re planning on opening up a new account soon!