Savings accounts are one of the most basic types of bank accounts. They’re typically low maintenance, affordable and very useful. You’d be hard-pressed to find a bank or credit union that doesn’t offer savings accounts, meaning you could go to just about any bank to open one to store your cash and watch it grow.
A savings account is a type of deposit account that earns interest on your balance.
Savings accounts are designed for setting money aside — whether for emergencies, short-term goals or just to keep your cash separate from your daily spending. Most banks and credit unions offer savings accounts, making them a safe, accessible and very useful way to save money.
Since they’re deposit accounts, savings accounts have complementary FDIC or NCUA deposit insurance, meaning your funds are protected federally up to $250,000 per depositor, per FDIC-insured bank, per ownership category. You do not have to pay for federal deposit insurance.
But before you open a savings account, consider their pros and cons.
Savings accounts are very useful and come with various advantages.
1. Earn money passively
Savings accounts reward you for keeping your funds with the institution in the form of interest, expressed as a percentage. The average rate on savings accounts is
0.42%, but you can find rates well above 4% with high-yield savings options.(1)
For example, if you kept $10,000 in a 4% APY savings account for one year, you’d earn $400 in interest.
2. Low maintenance and flexible
Plenty of savings accounts have no monthly fees and no opening deposit requirements. And unlike certificates of deposit, savings accounts don’t lock your funds for a set time. You can switch savings accounts as often as you want, since most don’t charge closure fees or early withdrawal penalties.
3. Offered nearly everywhere
Savings accounts are an essential product for banks and credit unions. In most cases, if a bank or credit union offers any deposit accounts, two of them are nearly guaranteed to be a checking account and a savings account.
4. Set up an automatic savings plan
Most modern banks let you automatically direct deposit a portion of your deposits into your savings. For example, you can have 10% of your paycheck deposited into your savings account for seamless building.
5. Overdraft protection
If you have a checking and savings account at the same bank, you may be able to link them. If there isn’t enough money in your checking account to complete a transaction, the funds could be transferred automatically from your savings to your checking to avoid those pesky overdraft fees.
6. Deposit insurance
Banks are known for their well-protected vaults, and if your financial institution goes bust, the FDIC or NCUA will guarantee your savings account balance up to $250,000.
Savings accounts are great, but there are just some things they’re not designed for.
1. Variable interest rates
While savings accounts are designed to earn interest, the amount you earn can fluctuate because they typically have variable interest rates. Banks and credit unions can adjust your savings account interest rate at any time, so it’s worth checking periodically to make sure you’re earning the best interest rate you can.
2. Lower rates than some options
Compared to other options like money market accounts or CDs, savings accounts tend to have lower interest rates. The FDIC reports that money market accounts have an average rate of
0.66%, and 12-month CDs have an average rate of
1.83% — while savings accounts have an average rate of just
0.42%.
Returns can also be much smaller than other options, like investing, but investing has more inherent risk than a federally insured deposit account.
3. Withdrawal limits common
For the most part, banks and credit unions only allow you to make up to six withdrawals per statement period from your savings account. While you can deposit as much as you’d like, your withdrawals will likely be limited each month. This limitation is partially by design, and since savings accounts aren’t meant for spending, it may not be too big of a deal, but it’s something to keep in mind.
If you want an account with unlimited withdrawals and spending, look to a checking account instead.
The most obvious use for savings accounts is that they’re a place to store your cash and have it grow passively, thanks to the interest rate. You can also have multiple savings accounts for separate uses, including one for your sinking funds, emergency fund, saving for college or saving for a large purchase like a home or vacation.
There is also no limit to how many savings accounts you can open. Individual intuitions may only allow you to open one savings account with them. However, there are no restrictions around having multiple accounts at many different institutions for different needs and use cases.
Narrow down top savings accounts by monthly fees, APYs and features. For a closer comparison, tick the Compare box on multiple accounts to see their benefits side by side.
The Finder Score crunches over 250 savings accounts from hundreds of financial institutions. It takes into account the product's interest rate, fees, opening deposit and features - this gives you a simple score out of 10.
To provide a Score, Finder’s banking experts analyze hundreds of savings accounts against FDIC-reported national averages as a baseline. Accounts with rates well over the national average are scored the highest, while accounts with rates well below are scored low.
Savings accounts are one of the most useful types of bank accounts out there. You can earn interest, craft savings plans and access your accounts via mobile banking for easy management. Savings accounts are federally insured, so even if a bank goes under, your funds are protected up to at least $250,000. They’re simple accounts that are not designed for spending — they’re meant to safeguard your funds and help them passively grow thanks to their interest rates.
However, savings accounts have variable interest rates, which means your interest earnings aren’t guaranteed. If you want something with guaranteed interest rates, consider a CD instead, since those lock your rate for the term.
The short answer is that banks and credit unions want you to keep your funds in their deposit accounts, so they limit how often and how much you can withdraw within certain time frames. Most traditional banks and credit unions limit your savings account withdrawals to six times per statement period.
The long answer is that banks and credit unions are required to have a certain amount of money in consumer deposit accounts (minimum reserve ratio against their liabilities). To stop their customers from withdrawing money from their accounts too frequently and keep their deposit amounts at a certain level, banks and credit unions restrict how often you can withdraw funds and may limit how much money you can withdraw daily, weekly or monthly.
Yes, many savings accounts let you open them with your partner to help you save faster together, or you and your kiddo could open one together to save for their future.
Anyone. Most savings accounts are available to almost everyone, from children to adults, and people from abroad to lifelong US residents. Some accounts are designed for specific people, like children’s savings accounts, student savings accounts, retirement savings accounts and more.
A free savings account with an industry-leading APY — but only one way to grab your money.
A look at the TAB Bank high-yield savings account and what customers say about it.
The DCU Primary Savings Account has a tempting rate, but it may not apply to your entire balance.
Explore the pros and cons of the Netspend Savings account to see if it’s worth parking your hard-earned cash there.
Citi offers a high-yield savings account with the caveat of a banking package for maximum benefit.
SoFi, Discover, Wealthfront, Varo, Uphold, Bask Bank, Current, Marcus and Ally offer top vacation savings accounts with high APYs.
If you struggle to save, you could benefit from a savings account or CD that won’t allow you to withdraw funds.
Uninterrupted compound interest accounts pay interest on your initial balance and the interest you continually earn if you don’t withdraw.
How to choose the best savings account for your situation.