• Skip to primary navigation
  • Skip to main content

Just Start Investing

We Make Investing Easy

  • Investing
    • Learn About Investing:
    • Investment Accounts
    • Online Brokerage Accounts
    • Investment Vehicles
    • Start Investing:
    • How to Invest in Index Funds
    • Start Investing with Betterment
    • Start Investing with Charles Schwab
  • Banking
    • Best Bank Accounts
    • Types of Bank Accounts:
    • Checking Accounts
    • Savings Accounts
    • CDs and Money Market Accounts
    • Online Banks vs Brick-and-Mortar
  • Credit Cards
    • Best Credit Cards:
    • Best Cash Back Credit Cards
    • Best No Annual Fee Credit Cards of 2021
    • Best Premium Credit Cards of 2021
    • Credit Card Tool: Find the Best Credit Card for Me
    • Learn About Credit Cards:
    • Types of Credit Cards
  • Blog
    • Investing
      • What is Crypto?
        • Crypto
      • What are stocks?
        • Stocks
      • What is a Real Estate Investment?
        • Real Estate Investments
      • What is an IPO?
        • IPO
    • Banking
    • Credit Cards
    • Budget
    • Finances
  • Earn with Crypto
  • Budget
    • How to Build a Budget
    • 24 Tips to Save More Money
  • Resources
  • About
    • Contact
    • Press
    • Learn More
    • Disclaimers
  • Show Search
Hide Search

What is a Savings Account?

Affiliate Links

A savings account is slightly more restrictive than a checking account, but usually offers better interest rates. It is better for longer term savings, but still inferior to most investment vehicles in generating long-term returns.

Savings Account Definition

A savings account is an interest bearing account where you can store funds and access them 6 times per month. The largest upside to savings accounts are their higher interest rates (especially with the rise of high yield savings accounts). While checking accounts are typically used for day to day transactions, savings accounts are a better place to to hold money for a longer term period of time. Most banks and credit unions offer savings accounts, and the minimum balance to open one is usually low.

When to Use a Savings Account

As mentioned, savings accounts are best for longer term savings. Some examples include:

  • Building up an emergency fund or safety net for unexpected costs that may arise in your personal life.
  • Stowing away cash for a large upcoming purchase (i.e. a car down payment, real estate, etc.).
  • Keeping a little extra cushion (on top of your checking account) for every day expenses that you can quickly and easily transfer over to make payments (allows you to earn more interest on this cash).

Savings accounts are versatile and a good avenue to save, but likely should not be your entire investment strategy. Some experts advocate for having no savings account at all, but only you can decide what you are comfortable with investing vs keeping in a bank account.

Savings Account Pros and Cons

Pros:

  • Safety: Savings accounts are insured by the FDIC for up to $250,000, and if you have more than $250,000 stashed away, you might want to consider rethinking your investing strategy.
  • Liquidity: While checking accounts offer ultimate ease of access, savings accounts are still a very a liquid investment that you can access 6 times per month. Plus, you can usually link your checking and savings account to easily transfer money between the two.
  • Interest Rates: While not as strong as the average S&P 500 return of 7%, some savings accounts do offer close to 2% interest rates.

Cons:

  • Withdrawal Limits: You can only withdraw funds 6 times per month.
  • Sneaky Fees: Minimum holdings penalties can eat away at any interest upside. Make sure to be aware of all fees as they are usually easily avoidable if you know to avoid them.
What is a Savings Account - Pinterest

Want to open a savings account? Check out our favorite banks.

The Latest Blog Posts:

  • What to Know Before You Fall for a Crypto Scam April 15, 2025
  • How to Choose the Best Crypto for Long-Term Investment April 10, 2025
  • What You Should Know Before Transferring Crypto April 8, 2025

As Featured In:

Just Start Investing Press Strip 2020 B&W

Follow Us:

  • Facebook
  • Twitter
  • Pinterest

Copyright © 2025 · Just Start Investing LLC

  • Contact Us
  • Blog
  • Privacy Policy / Disclaimers