A savings account is a bank or credit union account designed to store money safely while earning compound interest. It is mainly used for saving rather than daily spending.
Key Characteristics
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Provides a secure place to keep money
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Pays interest on deposited funds
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Money is usually not used for everyday transactions
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Funds often need to be transferred to a checking account before use
How a Savings Account Works
When you deposit money into a savings account:
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The bank uses your money to lend to individuals and businesses
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In return, you earn interest
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Interest is usually compounded, meaning interest is earned on both the principal and previous interest
In the U.S., savings accounts are insured by the FDIC up to $250,000 per depositor per bank.
Deposits and Withdrawals
You can:
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Deposit or withdraw cash
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Deposit checks
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Transfer money between savings and checking accounts
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Make electronic transfers between banks
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Receive direct deposits
There is no limit on deposits, and withdrawal limits depend on bank policy.
Regulation D
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Previously limited certain withdrawals to six per month
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The rule was suspended in 2020
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Banks may still impose their own limits
Opening a Savings Account
To open a savings account, you typically need:
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To be 18 years or older
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Valid identification
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Required personal information
Savings accounts can be opened online or in person.
Costs and Fees
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Many savings accounts are free
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Some require a minimum balance
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Fees may apply if minimum balance requirements are not met
Alternatives to Savings Accounts
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Online savings accounts: higher interest rates, lower fees
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Money market accounts: higher interest, easier access to funds
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Certificates of Deposit (CDs): higher returns for fixed terms, early withdrawal penalties may apply
Please take a look at this as well:
How to Choose the Best High-Yield Savings Account
