5 Benefits of a Savings Account

When it comes to a savings account, there’s a lot to love. This account can help you set money aside for the future and manage your finances, all while earning interest. Plus, your money is generally accessible.

Let’s discuss 5 key benefits of a savings account and 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. Interest rates on traditional savings accounts are generally low. However, high-yield savings accounts can offer higher rates, but may come with additional restrictions, like higher minimum deposit requirements. Either way, you’ll earn more than if you leave that money in a no-interest checking account.

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. Accessibility

Unlike some other financial products, such as certificates of deposit (CDs), you can generally access your savings account funds whenever you wish. That can make it 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. Money is FDIC-insured

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.

4. Generally easy to open

Savings accounts are generally easy to open. You may be able to open your online account in just minutes 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

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. This can help you work consistently toward your goals. Your employer may also let you send part of your paycheck 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, they 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.