Top five benefits of savings accounts

A savings account is a deposit account held at a bank or financial institution that provides a safe place to store money you’re setting aside for the future. While checking accounts provide a convenient way to access the funds you plan to use for everyday spending, savings accounts are designed to help you manage and grow your money with interest to achieve longer-term financial goals. With benefits like FDIC insurance, interest earnings, and accessibility, the benefits of a savings account can help you start building a nest egg for your future. 

Discover the key benefits of savings accounts:

• FDIC insurance
• Interest earnings
• Easy access to your money
• Encouraging a saving habit
• Low fees and minimums

#1: Your money is FDIC insured

When you open a savings account at a bank or a credit union, your funds are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), respectively. FDIC insurance protects your money up to the limit of $250,000 per depositor, per institution. So even if your financial institution fails, your money is secure up to the insured amount. This security is one of the primary benefits of savings accounts compared to keeping cash at home, where it can be lost or stolen, or putting it into short-term investments, where the risk of losing money can be high. 

Savings tip: Spread high balances across multiple institutions

The FDIC insurance limit applies to all the funds you have at a single institution, not to all your savings in general. If your savings success has led you to carry a balance of more than $250,000 at one bank, open an account at a different bank and spread your funds across the accounts to ensure all your money is protected. 

#2: Your money can earn interest

One of the primary benefits of savings accounts is the ability to earn interest on your balance. While you may be able to earn interest with your checking account, savings account interest rates are typically higher. Interest is calculated based on the amount of money in your account and is typically paid monthly or quarterly. And once that interest is paid, you can benefit from the power of compounding: the interest that’s added to your account balance starts earning interest too.  

Savings tip: Choose the right kind of savings account to earn more interest 

Not all savings accounts are created equal. While you’ll generally earn some interest in a standard savings account, certain types of savings accounts offer higher interest rates, providing a better return on your savings. Keep in mind, though, that these vehicles may come with higher minimum required balances and fees than traditional savings accounts. 

• High-yield savings accounts: These offer higher interest rates than standard savings accounts, and often have fairly low minimum balance requirements.
• Money market accounts: These offer competitive interest rates along with the convenience of check-writing privileges and, in some cases, a debit card. 
• Certificates of deposit (CDs): These offer a higher, fixed interest rate in exchange for keeping your money in the account for a set term.

#3: You have easy access to your money

Another benefit of savings accounts? They provide easy access to your funds when you need them. You can usually transfer or withdraw money without penalties up to a certain limit, which offers liquidity that other investment options may lack. Some savings accounts even allow you to withdraw cash at an ATM. This balance between earning interest and maintaining accessibility can make savings accounts an excellent option for putting your money to work for you without the worry that you won’t be able to tap into your cash when you need it. 

Savings tip: Keep your emergency fund in a savings account 

The ability to withdraw money when you need them is especially important when you’re building an emergency fund for unexpected expenses. Having quick access to your savings ensures you’re prepared to handle unforeseen financial challenges, such as medical bills, car repairs, or job loss. By storing your emergency fund in a savings account instead of your checking account, you keep it accessible and avoid accidentally dipping into it for day-to-day expenses.  

#4: They can encourage regular saving

The psychological benefits of seeing your savings grow over time can be highly motivating. If you’re working toward future financial goals, having a savings account can encourage you to maintain a regular saving habit. Many banks allow you to set up automatic transfers from your checking account to your savings account. Schedule a monthly recurring transfer to help you build a habit of saving without even thinking about it. You may be surprised at how quickly your savings can grow when you’re effortlessly adding to them on a regular basis 

Savings tip: Split your direct deposit 

If your employer offers direct deposit, consider having them deposit a portion of each paycheck straight into your savings account. That way, the money never even lands in your checking account, so you’re less likely to accidentally spend it or be tempted to derail your savings plan with an impulse purchase. 

#5: They usually have low fees and minimums

Many savings accounts come with low or no fees and minimal balance requirements, making them more cost-effective and accessible than other financial products, like investment accounts. This allows more people to enjoy the benefits of savings accounts because they can open and maintain one without having a significant lump sum to begin with. When you’re looking to open a savings account, make sure you understand all the potential fees, and compare different accounts to find the lowest fees available. 

Savings tip: Don’t let minimum balance requirements stop you from saving 

High-interest savings accounts and CDs may require you to deposit a large sum upfront in order to open the account. If you don’t have that money saved up already, don’t despair. Many standard savings accounts can be opened with very little money, or even $0. Start your savings journey with an account you can afford to open, and once you’ve built up your funds, transfer them to a higher-earning account to increase your interest returns. 

Leverage the benefits of savings accounts for your financial health

Learning how to make the most of a savings account can improve your financial outlook. By putting away money for the future, you can work toward your goals and build a savings habit that can support your financial stability.  

The safety of FDIC or NCUA insurance, the ability to earn interest, ease of access to your funds, and low fees and minimum balance requirements all mean that you can start your savings journey without taking unnecessary risks. And the sooner you start enjoying the benefits of a savings account, the more your money can grow over time.  

Savings account benefits: FAQs

What is the advantage of having a savings account?

A savings account provides a secure place to store your money while earning interest. It offers easy access to funds, encourages regular saving, and helps build financial discipline.

Is it worth putting money in savings?

Yes, putting money in savings is often worth it because you can earn interest, and the security of FDIC or NCUA insurance makes savings accounts virtually risk-free.

Why would you put money into a savings account?

You would put money into a savings account to earn interest, keep your funds secure, and have easy access to your money for emergencies or future expenses.

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