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What Is a Savings Account?
What Is a Savings Account?
A savings account is an account offered by a bank or credit union that allows you to set money aside for future use while typically earning interest on the money you keep in the account.
Unlike a checking account, which is generally designed for frequent spending and everyday transactions, a savings account is primarily designed for money you don't plan to spend regularly.
You might use a savings account to save for:
An emergency fund
College or education expenses
A car
A vacation
Moving expenses
A future purchase
Another personal savings goal
Here's an Example
Imagine you receive $500 from a summer job.
Instead of keeping the entire $500 in your checking account where you regularly spend money, you decide to put $300 into a savings account.
That $300 stays separate from your everyday spending money. You can continue adding money to the account over time, and depending on the account, the financial institution may also pay you interest for keeping your money there.
We'll learn exactly how that interest works later in the course.
Traditional vs. High-Yield Savings
Traditional vs. High-Yield Savings
Not all savings accounts are the same.
A traditional savings account and a high-yield savings account (HYSA) serve the same basic purpose: helping you set money aside while earning interest.
The major difference is that a high-yield savings account generally offers a higher interest rate than a traditional savings account.
But before deciding that "higher must be better," there's more to understand, including APY, fees, minimum balances, access to your money, deposit insurance, and account requirements.
That's what we'll break down throughout this course.
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