The 10 Types of Savings Accounts for Smart Households
Okay, from the outset, I want to be clear: I am not suggesting you have ten different types of savings accounts. Simplicity is often best. But I do know that connecting and naming a savings account to a specific goal is an effective strategy for staying on the same page with your spouse.
10 Types of Savings Accounts
Below are ten ways to use and name savings accounts. Think of it as a savings account buffet to choose from, based on your circumstances. Unless I suggest otherwise, the savings accounts I recommend offer a competitive APY (at least 3%) and have few restrictions, so you can access the money quickly without paying a fee.
1. Emergency fund (the “don’t panic” account)
Everyone should have a savings fund designated only for emergencies. The rule of thumb is to have at least 3 months of expenses tucked away. The more likely you or your partner are to lose your job or face unexpected expenses, the more you should have saved.
Now that my wife and I are empty-nesters and live in a midtown apartment, we don't need as much saved. When the HVAC goes out, they fix it. If the pool is a problem, that's their financial mess, not ours. We have an electric car that requires very little maintenance.
Others might live in older homes where things break down more often, or have a gas-powered car that is more likely to have expensive maintenance issues.
2. Income buffer (the paycheck smoother)
Think of this type of savings account as a shock absorber for your cash flow. Income volatility is becoming more common. More of us freelance or rely on bigger bonuses. Seasonal work is also tough for people who prefer steady income streams.
So you may need special accounts to smooth out the ebbs and flows, especially if you pay bills based on what came in this week instead of what your plan says for the month.
3. Sinking funds
These are for the planned expenses that like to pretend they’re surprises. This category stops “we didn’t budget for that” from becoming a monthly phrase. We had a sinking fund when we owned more assets that came with costs, including having children at home. Here is what we used our sinking fund to save for:
Property taxes
Insurance premiums
Holiday gifts
Car repairs and registration
Annual subscriptions
Home maintenance
4. Short-term goal savings
This is your account for something big you want to buy in the next 6-months to 3 years. Common examples include a down payment on a home, a kitchen remodel, or a new vehicle.
So the question remains: should this account be in a traditional savings account that earns 3%-4%, or in a brokerage account where you can take a bit more risk? Perhaps CDs or Treasury Bill laddering makes more sense, particularly in this higher-yield environment.
The rule of thumb is simple: if you’ll need the money soon, prioritize stability over growth. Short-term goals don’t belong on a roller coaster.
5. Shared goals savings
I like to think of this account as the teambuilder account. Use it to fund a shared goal that brings you closer together as a couple. Perhaps it's a long weekend away or a dream vacation, but the priority is that it brings you closer in your relationship.
6. No-guilt personal spending
Couples who are financial opposites or argue over small expenses should take a close look at this account type. If your partner criticizes you for smaller purchases because they're judging you, not complaining about what it does to your financial health, this account type can reduce the arguing.
The rule is that the spender never spends more than is budgeted, and the other partner always has access to the account details but makes a point of only checking if they suspect something nefarious, such as using the account to hide an affair. Think of the account as a conflict reduction tool.
7. Opportunity fund
Emergency funds protect you from bad things. Opportunity funds position you for good things! Maybe it's a professional certification or launching a side business. It's money set aside to invest in yourself or your family for an opportunity you need to save for, or one that hasn't presented itself yet.
8. Transition fund
Life changes are expensive. They come with unexpected expenses and can disrupt your pay. Here are a few examples:
parental leave gaps
caregiving needs
career breaks or re-entry
moving from two incomes to one (or back again)
Related: Check out our Transition to Marriage Page.
9. Tax buffer
If you’ve ever said after filing your tax return, “Why do we owe so much?” This account is for you. Tax buffer savings work best when you contribute throughout the year, especially if your income involves:
self-employment
bonuses
RSUs
capital gains
side gigs with no withholding
Related: What Should I Do With My Tax Refund?
10. Parking account for windfalls
Receiving a bunch of money at once is called a windfall, and in financial psychology, we call these windfalls financial slack. It makes us do weird things because money doesn't feel urgent. So when you get some sort of windfall (e.g., a bonus, an inheritance), park it in a special savings account without touching it, so you have time to make a planned, not impulsive, financial decision.
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