Savings Accounts: All About Choosing and Maintaining (2024)

  • Banking
  • Savings Accounts

Learn all there is to know about savings accounts from regular passbook to high yield to HSAs. Discover where to get the best interest rates, how they are taxed, and how a savings club works.

Savings Accounts

Best High-Yield Savings Accounts Today, March 12, 2024—Up to 5.50%BySabrina KarlUpdated Mar 12, 2024 Besides a Savings Account, Where Is the Safest Place to Keep My Money?ByAmy FontinelleUpdated Apr 20, 2022 How Interest Works on Savings AccountsByCarol M. KoppUpdated Mar 01, 2024 What Is a High-Yield Savings Account?BySabrina KarlUpdated Apr 27, 2023 How to Open a High-Yield Savings AccountBySabrina KarlUpdated Jan 03, 2022

Frequently Asked Questions

  • What makes a savings account a high-yield account?

    A savings account is considered high-yield if it pays more than a financial institution’s regular demand deposit or passbook savings accounts. High yield savings accounts are typically money market savings accounts that are limited to six withdrawal transactions per month.

    Learn MoreWhat Is a High-Yield Savings Account?

  • Are savings accounts subject to income tax?

    Interest earned on savings accounts is reported to the IRS by commercial banks and other financial institutions and therefore is subject to federal income tax as regular income. Interest is reported on Form 1099 to bank customers, typically in January each year for the previous tax year.

    Learn MoreHow Is a Savings Account Taxed?

  • How do savings accounts differ from a Roth IRA?

    Both savings accounts and Roth IRAs are funded with after-tax dollars by individual investors. However, unlike savings accounts, any capital appreciation earned with a Roth IRA is not subject to federal income tax. Growth in savings accounts, in the form of interest, is subject to taxation.

    Learn MoreSavings Account vs. Roth IRA: What’s the Difference?

  • How is interest calculated on a savings account?

    Simple interest for a savings account is calculated by multiplying the account balance by the stated interest rate and then multiplying by the time period the money is in the account. Interest = Principal amount X Interest Rate X Time Period.

    Learn MoreHow Interest Rates Work on Savings Accounts

  • How is a savings account different from a checking account?

    A savings account is different from a checking account in that it is meant for accumulation of funds and earning interest rather than being a transaction account accessible with checks and debit cards. Savings accounts can be freely accessed by the account holder through deposits and withdrawals on demand and generally pay higher interest than checking accounts but are not designed for payment transactions.

    Learn MoreThe Difference Between Term Deposit vs. Demand Deposit

Key Terms

  • Savings Account

    A savings account is a deposit account held at a bank or other financial institution that pays interest on the balance held in the account. Interest rates are typically modest but these accounts provide safety for emergency funds and savings needed for long-term needs.

    Learn More

  • Deposit Interest Rate

    The deposit interest rate is the rate paid by banks and other financial institutions to deposit account customers in exchange for the use of their deposits to make loans. Deposit accounts include passbook savings, high-yield savings accounts, and certificates of deposit accounts.

    Learn More

  • Sweep Account

    A sweep account is a specialized account that is often attached to a brokerage account to automatically transfer or sweep cash funds into a low-risk, higher interest-earning investment such as a money market fund at the close of each business day.

    Learn More

  • Passbook Loan

    A passbook loan is a loan made to a savings account owner or depositor by the bank holding the funds. The savings account balances serve as collateral for the personal loan, which is also called a pledged asset loan.

    Learn More

  • Linked Savings Account

    A linked savings account is a deposit account connected to another account such as a checking or brokerage account. Linked savings accounts are usually held by the same financial institution as the customer's other accounts, facilitating efficient and timely transfer of funds between accounts.

    Learn More

  • Joint Account

    A joint account is a type of deposit account that is held by two or more people, often spouses. Joint accounts are generally checking or savings accounts where both parties can make account transactions like deposits and withdrawals individually.

    Learn More

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How Is a Savings Account Taxed?BySean RossUpdated Dec 21, 2023 Sweep Accounts Definition: Types and How They WorkByJames ChenUpdated Dec 21, 2023 The 5 Best Alternatives to Bank Savings AccountsByJ.B. MaverickUpdated Jul 25, 2022 Term Deposit vs. Demand Deposit: What's the Difference?ByChristina MajaskiUpdated Jul 17, 2023 How Foreigners Can Open Savings Accounts in the U.S.BySean RossUpdated Aug 01, 2023 Annual Equivalent Rate (AER): Definition, Formula, ExamplesByMarshall HargraveUpdated Dec 14, 2023 Current Account Savings Account (CASA): Definition and FormulaByAlicia TuovilaUpdated Mar 10, 2024 Transaction: What it Means, How it Works, ExampleByWill KentonUpdated May 26, 2022 Savings Account vs. Roth IRA: What’s the Difference?ByThe Investopedia TeamUpdated Feb 13, 2024 Money Market Fund vs. MMA vs. Savings Account: What’s the Difference?ByAndrew BeattieUpdated Feb 23, 2024 Medical Savings Account (MSA): Meaning, History, TypesByJulia KaganUpdated Nov 15, 2022 Foreign Savings Account: What it Means, How it WorksByKate AnaniaUpdated Jun 26, 2023 How to Open a Swiss Bank Account and Advantages in Having OneByAlbert PhungUpdated Dec 09, 2023 4 Savings Accounts for InvestorsBySarita HarbourUpdated May 22, 2023 Individual Development Account (IDA): What it is, How it WorksByJulia KaganUpdated Sep 05, 2022 CDs vs. MMAs vs. Savings AccountsByMichelle UllmanUpdated Jun 02, 2022 Chase Savings Account Interest Rates: March 2024ByMichelle L. BlackUpdated Mar 05, 2024 IBAN vs. SWIFT Code: What's the Difference?ByMary HallUpdated Dec 20, 2023 Deposit Interest Rate: Definition, Fixed Vs. VariableByJulia KaganUpdated Mar 31, 2021 Bank of America Savings Account Interest Rates: March 2024ByLindsay VanSomerenUpdated Mar 05, 2024 Why Choose a Money Market Account Instead of a Savings Account?BySean RossUpdated May 18, 2023 Negotiable Order of Withdrawal Account: Overview, HistoryByJulia KaganUpdated Aug 16, 2021 Wells Fargo Savings Account Interest Rates: March 2024ByRebecca SafierUpdated Mar 05, 2024 Passbook Loan: Meaning, How it Works, Pros and ConsByJane MeachamUpdated Aug 17, 2023 Linked Savings Account: Meaning, Benefits, FAQsByJulia KaganUpdated Nov 03, 2021 Capital One Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 USAA Savings Account Interest Rates: March 2024ByRebecca SafierUpdated Mar 05, 2024 Citibank Savings Account Interest Rates: March 2024ByJessica UllrichUpdated Mar 05, 2024 Fidelity Cash Management Account Interest RatesByMichelle L. BlackUpdated Sep 20, 2023 Ally Savings Account Interest Rates: March 2024ByErin GoblerUpdated Mar 05, 2024 TD Bank Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 SoFi Savings Account Interest Rates: March 2024ByMichelle L. BlackUpdated Mar 05, 2024 Discover Savings Account Interest Rates: March 2024ByBen LuthiUpdated Mar 05, 2024 American Express Savings Account Rates for 2024ByErin GoblerUpdated Jan 18, 2024 Best Savings Account BonusesByJessica UllrichUpdated Feb 27, 2024 Christmas Club: Overview, History, ExampleByJason FernandoUpdated Nov 03, 2021 E*TRADE Savings Account Interest Rates: March 2024ByBen LuthiUpdated Mar 05, 2024 Apple Bank Savings Account Interest Rates: March 2024ByErin GoblerUpdated Mar 05, 2024 Marcus Savings Account Interest Rates: March 2024ByLindsay VanSomerenUpdated Mar 05, 2024 Barclays Savings Account Interest Rates: March 2024ByMichelle L. BlackUpdated Mar 05, 2024 Charles Schwab Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 U.S. Bank Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 State Farm Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 LendingClub Savings Account Interest Rates: March 2024ByKat TretinaUpdated Mar 05, 2024 What Is a Savings Account and How Does It Work?ByJulia KaganUpdated Mar 01, 2024 JointByJulia KaganUpdated Feb 01, 2021 Employee Contribution Plan: Meaning, Design, PopularityByJason FernandoUpdated Jan 29, 2021 How Does a Thrift Savings Plan (TSP) Work?ByBrian BeersUpdated Dec 07, 2023 Savings ClubByJason FernandoUpdated Mar 28, 2022 Health Savings Account (HSA) Rules and LimitsByJean FolgerUpdated Dec 21, 2023

Banking

Bank ReviewsChecking AccountsCertificate of Deposits (CDs)Money Market Account

Savings Accounts: All About Choosing and Maintaining (2024)

FAQs

How do you choose a savings account? ›

What to look for in a savings account
  1. Interest rate and APY.
  2. Initial deposit requirement.
  3. Minimum balance requirements.
  4. Account fees.
  5. Rate tiers • Accessibility and ease of use.
  6. Supplemental savings accounts.
  7. Other accounts and products.
Apr 25, 2024

What is the purpose of a savings account? ›

A savings account is a good place to keep money for a later date, separate from everyday spending cash, because it offers safety, liquidity and interest-earning potential for your funds. These accounts are a great place for your emergency fund or savings for shorter-term goals, such as a vacation or home repair.

How to maintain a savings account? ›

How to Manage Your Savings Account Effectively
  1. Don't Go Overboard. ...
  2. Separate Your Savings. ...
  3. Choose the Right Type of Savings Account. ...
  4. Work Towards Savings Goals. ...
  5. Use Direct Deposit. ...
  6. Check in Regularly. ...
  7. Save From Every Source of Income. ...
  8. Treat Your Savings as Off-limits.

What factors would you take into account when choosing a savings account? ›

What to consider when choosing a new savings account
  • Interest rates. In many cases, interest rate is the top reason for selecting a particular account. ...
  • Accessibility. ...
  • Saving without paying tax. ...
  • Savings goals. ...
  • Find out more on how to choose a savings account.
Oct 31, 2023

Are savings accounts worth it anymore? ›

The short answer to this question is yes, high-yield savings accounts are still worth opening today. But that answer could change in the months to come. That being said, high-yield savings accounts are generally still worth opening for all of the following reasons.

Which savings account is best? ›

Best Savings Bank Accounts of 2024
Sr.No.Bank NameRates of Interest(p.a.)
1State Bank of India2.70% - 3.00%
2Union Bank of India2.75% - 3.55%
3HDFC Bank3.00% - 3.50%
4ICICI Bank3.00%
6 more rows
Mar 13, 2024

How much money should I keep in a savings account? ›

Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.

Is it good to keep money in a savings account? ›

It's Low-Risk

In many investments, you'll lose money over the course of individual days, weeks, months or even years. But with a savings account, your balance won't go down. It will only go up. (That is, until you take money out, of course.)

What are the pros and cons of savings? ›

Savings account benefits include safety for your savings, interest earnings and easy access to your money. However, savings accounts may have drawbacks, such as variable interest rates, minimum balance requirements and fees.

What is the ideal savings rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What is the safest place to keep a savings account? ›

The safest banks in the U.S. for May 2024
BankThe Ascent's RatingFDIC Insured?
Western Alliance Bank4.25Yes
SoFi4.00Yes
Wells Fargo4.00Yes
Axos Bank3.50Yes
6 more rows
Apr 25, 2024

What is the 3 saving rule? ›

This model suggests allocating 50% of your income to essential expenses, 15% to retirement savings and 5% to an emergency fund. This plan allows you to meet your immediate needs and plan for the future before you spend on anything else.

How should I choose a savings account? ›

Which savings account is best? The best savings accounts pay high interest rates, charge few fees and provide the accessibility you need. A savings account with an excellent APY at an online bank or credit union may be the best option for you if you don't mind forgoing branch banking.

How is a savings account most useful? ›

Because it usually provides interest, allows for easy withdrawals, and is insured, a savings account is most useful for money that you would need in the near future. This makes savings accounts ideal for emergency funds and your large purchase goals.

What are the three types of savings? ›

Choosing a savings account is an important financial decision that can help people achieve their financial goals. Banks offer customers a variety of options when it comes to savings accounts. This lesson focuses on the following three types of savings accounts: traditional, money market, and certificate of deposit.

How do I know which savings account is best? ›

Interest rate: The interest rate is often the headline-grabber. Some accounts may lure you in with bonus rates, so it's wise to scrutinize their duration and any strings attached, such as minimum regular savings. Interest might be fixed for a set term or variable as the market changes.

How do I choose a bank for my savings account? ›

Here are the important factors to consider:
  1. Interest Rate and Annual Percentage Yield (APY) ...
  2. Initial Deposit Amount. ...
  3. Maintaining Balance Requirements. ...
  4. Monthly Fees and Other Service Charges. ...
  5. Account Opening Requirements. ...
  6. Accessibility and Usability. ...
  7. Supplemental Savings Accounts. ...
  8. Savings Account Perks.

What's the best account to put savings into? ›

6 types of savings accounts that can help grow your money
  • Traditional savings accounts. A traditional savings account is essentially a place to hold your money that earns interest. ...
  • High-yield savings accounts. ...
  • Certificates of deposit. ...
  • Money market accounts. ...
  • Cash management accounts. ...
  • Specialty savings accounts.

What are the 3 most common types of savings accounts? ›

Types of savings accounts
  • Regular savings account: earns interest and offers quick access to funds.
  • Money market account: earns interest and may provide check-writing privileges and ATM access.
  • Certificate of deposit, or CD: usually has the highest interest rate among savings accounts, but no access to funds.
Apr 4, 2023

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