The average cost of a wedding in 2024 rivals a down payment for a midsize home in a community with great schools. It's no wonder many couples start planning for the big day well in advance. According to Zola’s annual First Look Report, 89% of couples surveyed started planning for their wedding before the proposal, anticipating expenses of more than $30,000 for the ceremony and reception.Â
Whether you’re planning a wedding to rival the British royal court or a backyard wedding with your closest friends and family members, selecting the right savings account option will maximize your interest growth, making it easier to reach your savings goals.
Best accounts for wedding savings
A high-yield savings account, money market account or certificate of deposit can help you earn interest on the money you're saving for wedding expenses. All of these accounts are insured against bank failure by the Federal Deposit Insurance Corporation (for banks) or the National Credit Union Administration (for credit unions), for up to $250,000 per person, per institution.
Here's how these accounts stack up against each other.
High-yield savings accounts
High-yield savings accounts are interest-earning accounts with a competitive annual percentage yield, or APY, that's multiple times the national average rate of 0.46%. A high-yield savings account is a great way to boost your interest earnings while keeping your money easily accessible. The best APYs available on high-yield savings accounts are as high as 5.55% and are often offered by online banks or credit unions.
For example, if you deposit $5,000 in one of the following high-yield savings accounts for one year, your interest earnings would be as follows:
Bank | APY | Interest earned on $5,000 in 1 year |
My Banking Direct | 5.55% | $277.50 |
5.10% | $255.00 | |
4.20% | $210.00 |
Rates as of May 14, 2024. Earnings are based on APYs and assume interest is compounded annually.
Pros and cons of high-yield savings accounts
Pros
- Higher rates: High-yield savings accounts typically have higher APYs than traditional savings and checking accounts, which means your money will grow faster.
- Flexible access: You can withdraw or deposit money when you want without penalty, as long as you mind any monthly withdrawal limits.
Cons
- Variable rates: Savings account APYs are variable and can change based on market conditions without notice.
- Limited or no physical branch access: High-yield savings accounts are often offered by online-only banks, so you’ll need to be comfortable managing your account online.
- Transfer time: It can take one to three business days to transfer money from your savings to an external bank account -- which, for example, you might need to do to write a check to a vendor.
- Withdrawal restrictions: Some banks may limit your withdrawals to six per statement cycle before charging an excessive withdrawal fee.
Money market accounts
A money market account, or MMA, combines checking account features -- such as check writing privileges and debit card access -- with the interest-bearing ability of a savings account. MMAs usually require a higher balance to earn interest and keep your account in good standing, and you may only be able to make a limited number of withdrawals per month.Â
Setting aside $5,000 in a money market account for at least one year to cover wedding expenses will result in the following yields:Â
Bank | APY | Interest earned on $5,000 in 1 year |
Vio Bank | 5.30% | $265.00 |
EverBank | 4.30% | $215.00 |
Ally | 4.20% | $210.00 |
Rates as of May 14, 2024. Earnings are based on APYs and assume interest is compounded annually.
Pros and cons of money market accounts
Pros
- Competitive rates: Larger balances can earn higher APYs for accounts that operate on a tiered model.
- Flexible access: Most banks provide debit card access and check-writing privileges with MMAs, making your money easily accessible.
Cons
- Variable APYs: MMA interest rates are generally variable, making your return less predictable. Rates can change at any time, decreasing your return if they drop.
- Minimum balance requirements: MMAs typically have higher initial deposit and minimum balance requirements than savings accounts, and you'll incur fees for dipping below that minimum. You may also earn a lower interest rate for lower balances. However, there are some competitive MMAs with low or no minimum balance requirements.
- Withdrawal restrictions: Some banks may limit the number of transfers and withdrawals you can make each month. Surpassing that limit incurs an excessive transaction fee.
- Lower yields than other long-term bank products: While MMAs earn higher rates than traditional savings accounts, you can earn bigger returns on long-term products like CDs or other investment accounts.
Certificates of deposit
A certificate of deposit, or CD, offers a fixed interest rate for a set time period, or term. Most CDs have terms from three months to five years.
A CD may pair well with wedding savings goals because you have a specific date when you’ll need the money. If you can leave the money in the account until the term ends, you’ll avoid paying early withdrawal penalties, which can eat into your interest earnings. These penalties range from 90 to 365 days’ worth of interest, depending on the bank and the CD term.
Here's what you can earn by depositing $5,000 in a one-year CD:
Bank | APY | Interest earned on $5,000 in 1 year |
5.31% | $266.20 | |
5.05% | $22.50 | |
4.80% | $240.00 |
Rates as of May 14, 2024. Earnings are based on APYs and assume interest is compounded annually.
Pros and cons of CDs
Pros
- Fixed rates: Your APY is locked in, so your interest earnings are guaranteed for the entire term.
- Higher rates: Banks pay higher interest on CDs because you're agreeing to keep your money in the account for a specific length of time.
Cons
- Withdrawal penalties: Money withdrawn before the CD matures, or reaches the end of its term, is subject to an early withdrawal penalty that can reduce your overall earnings.
- Minimum balance requirements: Most CDs require a minimum balance to open. However, several CDs require an initial deposit as low as $500 or $1,000.
- One-time deposit restrictions: Most CDs don't allow you to deposit additional money once the account has been opened.
I bonds
Series I bonds are another safe savings option because they're backed by the federal government. Their interest rate is tied to inflation and locked in for six-month periods -- the current rate for I bonds issued from May 1 to Oct. 31, 2024 is 4.28%.Â
I bonds may be an unconventional savings account for a wedding fund unless you’re a serious planner with a time horizon of five years or more. By leaving your wedding funds in a series I bond for at least five years, you won’t incur any early withdrawal penalty and your interest earning will always outpace inflation.Â
You can cash in a series I bond any time after the first 12 months. But be prepared to forfeit the previous three months’ interest if you’ve held the I bond for less than five years.
Pros and cons of I bonds
Pros
- Long-term stability: Your returns are more predictable than the APYs earned with savings accounts because I bond rates are tied to inflation and only change twice a year.
- Inflation hedge: Series I bonds are designed to protect your money from losing value because of inflation.
- Tax advantages: The interest earned with series I bonds is exempt from state taxes. Savings account, MMA and CD earnings are subject to both state and federal income taxes.
Cons
- Variable returns: As inflation continues to recede, I bond rates will also come down. In contrast, if you open a CD while rates are high, your interest earnings will be fixed for the entire term.
- Holding period requirements: You’ll pay a penalty of three months' interest for withdrawing money in a savings bond you’ve held for less than five years.
Which savings account is best for your wedding fund?
The best savings account to use for wedding planning depends on several factors. Ask yourself the following questions to narrow down the best choice for you.Â
What’s your time horizon? When you’ll need the funds should align with any access restrictions for the account type. For example, if you’re choosing a CD, select one with a term that ends before you’ll need to start paying wedding expenses.
Are you saving a lump sum? If you have a large sum to deposit and a longer time horizon, a CD or series I bond can provide more predictable interest growth. In addition, the early withdrawal penalties can minimize the temptation to access your savings before you need it.
Will you add money at regular intervals? If you plan to add to your wedding fund over time, high-yield savings or money market accounts allow you to make deposits at any time.
How would you prefer to access the money? Once you need to access the money, high-yield savings and MMAs offer the most liquidity. However, some online savings accounts don’t offer ATM or debit card access and must be connected to an external bank through electronic transfers. Cash in a CD or series I bond will need to be transferred to another account when you need it.
Does the bank charge fees? Avoid any savings account that charges a monthly fee or a fee to maintain a minimum balance. These fees will work against your efforts to save for wedding expenses.
What’s your time horizon? When you’ll need the funds should align with any access restrictions for the account type. For example, if you’re choosing a CD, select one with a term that ends before you’ll need to start paying wedding expenses.
Are you saving a lump sum? If you have a large sum to deposit and a longer time horizon, a CD or series I bond can provide more predictable interest growth. In addition, the early withdrawal penalties can minimize the temptation to access your savings before you need it.
Will you add money at regular intervals? If you plan to add to your wedding fund over time, high-yield savings or money market accounts allow you to make deposits at any time.
How would you prefer to access the money? Once you need to access the money, high-yield savings and MMAs offer the most liquidity. However, some online savings accounts don’t offer ATM or debit card access and must be connected to an external bank through electronic transfers. Cash in a CD or series I bond will need to be transferred to another account when you need it.
Does the bank charge fees? Avoid any savings account that charges a monthly fee or a fee to maintain a minimum balance. These fees will work against your efforts to save for wedding expenses.
