Savings Account or Share Certificate: Which is Better for You?

According to the Federal Reserve, only 64% of Americans have enough money on hand to cover a $400 emergency, and 60% of American adults are living paycheck to paycheck. Meanwhile, the average American household owes nearly $8,000 in credit card debt per year.

Those numbers are a bit unnerving. Here at Verve, we’re committed to helping you make informed and wise decisions about your finances. Today, we’re going to share a few factors to help you determine the best savings option for you. While not always feasible, it’s clear that sticking to a savings plan is preferable to accumulating debt. Let’s get started.

What is a savings account?

Simply put, a savings account is a place for you to regularly deposit money and watch it grow. Common savings goals include establishing an emergency fund, saving for a specific goal (such as a vacation or new phone), or increasing your overall savings. Savings accounts are not considered transaction accounts, like a checking account or credit card. A savings account is meant to deposit frequently and withdraw money infrequently. Some financial institutions have limits on the number of transfers from savings that you can make per month, but Verve does not.

What is a share certificate?

Like a savings account where you set money aside, a share certificate typically deals with a longer period of time that your money will be set aside and not accessed. Share certificates are designed for larger balances, typically a minimum of $1,000. They have terms that can range from 3 months to 5 years. Share certificates also typically have higher dividend rates than savings accounts. This means you can earn more money just by saving your money.

What’s best for you?

There are two key factors to keep in mind. First, you’ll want to take stock of your financial situation. Second, you’ll want to determine your goal. For example, are you starting from scratch? Looking to build your emergency fund? Financially established? Looking to build wealth?

Here are our suggestions.

With so many savings options, there’s no wrong choice—but there are definitely specific options that will suit your needs better than others.

If you’re just starting out, we offer a basic savings account that requires a $5 share pledge and a $100 combined average daily deposit balance. The dividend rate isn’t exorbitant, but it’s a good place to start. Same deal if you want to open a savings account for your child or children: We offer a Kids’ Savings account that has the same terms and conditions as the basic savings account.

For easy access to your money and to cover your bases, consider a Name Your Savings, Pick Your Payout, and KickBack Savings account. With a Name Your Savings account, you can put money in and take it out as often as you like with very few restrictions. A Pick Your Payout account makes it tougher to tap into savings by locking your savings until a certain date. That means, if you choose to withdraw funds before your payout date, you’ll pay a fee. Both the Name Your Savings and Pick Your Payout accounts earn dividends for saving money, and you can amp up the dividends you earn when you pair a KickBack Checking account with a KickBack Savings account.

For the goal-getters and overachievers, go for the certificate specials. There is only a $1,000 minimum, and the current rates are very competitive. This is an awesome option if easy access to your savings is a nonfactor and you’re looking to build your wealth.