Savings Accounts

If you’re building an emergency fund, saving for a big purchase, or getting money together to invest, using an insured savings account can put you on the right road.

Most banks and credit unions offer a variety of savings accounts. Some popular savings options beyond the basics include money market accounts, and certificates of deposit (CDs).

Getting Interested

With a savings account, you earn interest, or a percentage of your balance, on the money in your account. This means that your money is constantly growing. What you earn depends on the interest rate the bank pays—which varies by account type and is set by the bank based upon what other banks pay for similar accounts.

Regular Rules

The most basic accounts, where you can deposit and withdraw money at any time, are called regular savings accounts, or sometimes statement savings accounts. What that means is that any activity in the account—deposits, withdrawals, fees, or interest earnings—and your current balance are reported in a printed or online account statement, usually once a month.

You earn interest on a regular savings account only if you keep at least the minimum required amount in the account. If your balance is lower, some banks don’t pay interest and others may charge a fee for holding your money. The only way to avoid such penalties is to get an account without a required minimum or fall into a category that would allow it to be waived, such as being a full-time student or older than 65.

While you’ll certainly earn more in a regular savings account than if your money was in a checking account or no account at all, a regular savings account probably won’t earn you tons of extra funds. Whatever the interest rate is, it’s likely to be the lowest one the bank offers.

Money Market Accounts

Most banks offer hybrid accounts—part checking, part saving—called money market accounts (MMAs) or sometimes money market deposit accounts. They’re similar to money market mutual funds, but have the advantage of FDIC insurance.

MMAs typically pay higher interest rates than regular savings accounts, and may offer blended or tiered rates, which means you can earn an even higher rate on large balances or on part of your balance over a certain level.

And you can usually make a limited number of cash transfers or write a limited number of checks—generally a total of three—against your account each month.

The catch is that the minimum required deposit is often higher than with a regular savings account. If your account falls below that mark, you may face substantial service fees, forfeit your interest, or both.