Savings Accounts

A savings account is a fundamental tool of personal finance. Learn how these accounts work, how to shop for one, and how they can help your money work for you.

The Balance’s Guide to Savings Accounts

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Frequently Asked Questions
  • What is a savings account?

    A savings account is a simple bank account that allows you to deposit money, keep it safe, and withdraw funds, all while earning interest on the amount deposited. Savings accounts offered by most banks, credit unions, and other financial institutions are insured by the government. Most banks limit the number of transactions you can make with a savings account, which can be a good thing if you’re trying to rein in spending and “save.”

  • What is a high-yield savings account?

    A high-yield savings account is a lot like a traditional savings account with one big exception: It offers higher interest rates. These accounts are commonly found at online banks, which means you sacrifice the convenience of branch banking. They may also require higher minimum deposits than regular savings accounts.

  • How does interest work on a savings account?

    When you lend money, you typically get your money back plus a little bit extra. That extra is the "interest," or your compensation for letting somebody else use your money. The same is true when you deposit funds into a savings account. Most savings accounts pay “compound interest,” which means you earn interest on the principal plus on any interest you have earned previously. You can calculate interest earned using our spreadsheet calculator.

  • What is the difference between a savings and a checking account?

    Savings accounts are designed to keep your money safe while paying a modest amount of interest on your account balance. Most banks will limit the number of transactions you can make with your savings account. A checking account is designed for frequent transactions, and you can use your money in a variety of ways—paper checks, electronic payments, debit cards, ATMs, and more.

  • How do you open a savings account?

    Most banks and credit unions make it pretty easy to open a savings account. In fact, the hardest part may be choosing a bank or credit union. Once that’s done, you provide the bank with some details, fund the account, and you’re on your way.

Key Terms

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Image shows multiple scenarios with captions. The title reads: "How to Open a Savings Account". First image is a woman holding up two pamphlets and the caption reads "Compare banks". The next is the woman on a laptop looking up a credit union, and the caption reads "See if you're eligible for a credit union". The next image shows a license, piece of mail, and a social security card, and the caption reads: "Gather your documentation". The next image shows the woman at a bank talking to a teller to open an account. Text reads: "Open an account online or in person." The next is a hand holding a phone transferring money through an app. The caption reads: "Add funds to the account"
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