If you're working toward buying a home, where you keep your savings matters just as much as how much you’re saving. While the stock market may offer attractive returns, it’s not the best place for your down payment or other short-term homebuying funds—volatility and potential losses could derail your plans just when you're ready to buy. Instead, consider safer, interest-bearing accounts that preserve your capital while still helping it grow. Options like high-yield savings accounts (HYSAs), money market accounts (MMAs), and certificates of deposit (CDs) are designed for just this kind of goal. Let’s explore your best bets for storing homebuying funds wisely:
1. High-Yield Savings Account (HYSA): Flexible Growth with Minimal Risk
When it comes to saving for a down payment or closing costs, high-yield savings accounts often strike the perfect balance between security and accessibility. “These accounts offer higher interest than traditional savings accounts, without tying up your funds,” says Wendy Rosen, a financial planner at Marc Jacobson & Associates. As of May 2025, many HYSAs offer annual percentage yields (APYs) around 4.4%—a huge jump from the 0.41% national average of regular savings accounts. For example, saving $10,000 in a HYSA could earn you around $440 in interest in a year, compared to just $41 in a basic account.
Pros:
- Higher returns than traditional savings
- Easy access to funds
- No penalties for withdrawal (though monthly limits may apply)
Considerations:
- Rates are variable and subject to change based on the federal funds rate
2. Money Market Account (MMA): A Hybrid Option with Added Flexibility
Think of a money market account as a savings-checking hybrid. It typically earns interest at competitive rates and may offer check-writing and debit card access — making it a practical choice if you need occasional liquidity. Many MMAs are currently offering yields above 4%, on par with HYSAs.
Pros:
- High interest rates
- Convenient access via checks or debit cards
- FDIC-insured in most cases
Considerations:
- May require a higher minimum balance
- Possible monthly maintenance fees
If you’re just starting to build your savings, make sure to check account requirements to avoid unnecessary fees.
3. Certificate of Deposit (CD): Higher Returns for Committed Savers
A CD lets you lock in a lump sum at a fixed interest rate for a set term—ranging from a few months to several years. With APYs often exceeding 4%, they can offer strong returns if you don’t need access to your money in the near future. But there’s a catch: withdrawing funds before the term ends typically triggers a penalty. “If your dream home hits the market before your CD matures, you’ll likely pay for breaking it early,” Rosen warns. “Only use CDs if you’re confident you won’t need those funds anytime soon.”
Pros:
- Guaranteed rate of return
- No market exposure
- Typically FDIC-insured
Considerations:
- Early withdrawal penalties
- Limited flexibility
Bottom Line: Protect Your Progress
Sure, you might miss out on stock market gains by keeping your home fund in these accounts—but you’ll also avoid the risk of market dips wiping out your savings. For a purchase as important and time-sensitive as a home, capital preservation should take priority. Work closely with your financial advisor, real estate agent, and mortgage lender to align your savings strategy with your homebuying timeline. With the right tools in place, you’ll be ready to make a strong, secure offer when the time is right.
