Key insights:
- A major benefit of a savings account is earning interest while your money sits unused
- You also gain a secure, accessible place to set aside funds for emergencies or future needs
- Another advantage is keeping savings separate, which can help you stay organized and consistent
When it comes to a savings account, there’s a lot to love. This type of account can help you set money aside for the future and manage your finances, all while earning interest. Plus, your money is generally accessible.
What are the benefits of having a savings account?
Let’s discuss the benefits that savings accounts offer, as well as some tips to make the most of your account.
1. Earn interest on your savings
Savings accounts are typically interest-bearing, which means you can get a return on money you aren’t actively using. Interests are compounded, so even small deposits can grow steadily.
Most savings accounts earn compound interest. That means interest is earned on your deposited amount plus earned interest, which is added to the principal over time.
2. Access funds easily when you need them
Unlike some other financial products, such as certificates of deposit (CDs), you can generally access your savings account funds whenever you want. That can make a traditional savings account an excellent place to store an emergency fund, which is meant to cover unexpected expenses.
Keep in mind that your bank may limit your monthly withdrawals or transfers. Being strategic about transfers and withdrawals can help you avoid fees.
3. Enjoy peace of mind with FDIC protection
When you open a savings account at an FDIC-insured bank, your deposits are insured up to $250,000 per depositor, for each account ownership category at that bank.
FDIC insurance coverage begins automatically when you open an account at an FDIC-insured bank. You don’t have to do anything extra to enroll — your protection is in place from the start.
4. Savings accounts are generally easy to open
You may be able to open your savings account online once you have the required documents. You’ll generally need to provide:
- A government-issued photo ID, such as a passport or driver's license
- A second form of ID, like a utility bill in your name
- Your Social Security number or individual taxpayer identification number
Opening a savings account with your current bank may be even simpler, since they already have your information.
If you’re approved, you can make your first deposit. The minimum opening deposit for a traditional savings account may be low. Some banks, like Citi, don’t have a minimum deposit requirement — but the earlier you make a deposit, the sooner you can start earning interest. Additionally, some banks may require you to make a deposit within the first 90 days of opening an account. Otherwise, your account may be subject to closure.
5. Keep your savings separate from other funds
Saving money can take dedication. Keeping your savings in a separate account can let you easily see how much progress you’ve made toward your goals and may help you stay motivated.
Many savings accounts let you set up automatic transfers, which could help you work consistently toward your goals. Your employer may also let you send part of your paycheck directly to your savings account via direct deposit.
Making your savings account work for you
A savings account can make it easier to actively save for future goals, grow your money and protect your finances.
You can get even more out of your account if you’re strategic. For example, automatic transfers can help you build a savings habit as well as your account balance. Opening multiple savings accounts can also help you save for and easily keep track of different goals simultaneously. You might have an account dedicated to short-term expenses and another for travel.
Savings accounts are important financial tools. Along with other ways to save and invest, like CDs and retirement accounts, having at least one savings account can help you reach your goals and save for the future.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
