Savings Accounts 101: A Guide to Savings Accounts

Key insights:

• A savings account helps you store money securely while earning interest
• Interest is typically expressed as APY (Annual Percentage Yield), which shows how your balance can grow over time
• Keeping savings separate from checking can help you stay organized and consistent

Saving money is one of the most important steps you can take toward building financial stability. Whether you're setting aside funds for a short-term goal or planning for the future, a savings account can help you stay organized, earn interest and make steady progress.

Explore the basics of savings accounts, learn how they work and find answers to common questions.

What is a savings account?

A savings account is a deposit account offered by a bank or credit union that allows you to store money while earning interest. It’s typically used for money you don’t plan to spend right away, such as an emergency fund, travel savings or a future purchase.

Savings accounts are designed to keep your money accessible while helping it grow over time through interest.

How savings accounts work

When you deposit money into a savings account, the bank typically pays you interest based on your balance. Interest is usually expressed as an annual percentage yield (APY), which shows how much your balance can grow over time.

Many savings accounts let you:

• Deposit money through transfers, direct deposit or in person
• Withdraw or transfer money as needed (though some accounts may limit certain transactions)
• Monitor your balance and activity online or through a mobile app

Why use a savings account?

A savings account gives you a dedicated place to set money aside, so it is easier to save consistently. By separating savings from everyday spending, you can reduce the temptation to dip into funds meant for future goals and earn interest on your balance.

Savings accounts can help you prepare for both expected costs and unexpected expenses without relying on credit.

Common reasons to use a savings account include:

• Building an emergency fund to cover unplanned expenses like car or home repairs
• Saving for larger goals such as a home, a car or another major purchase
• Setting aside money for short-term plans like travel, holidays or special events
• Creating separate savings buckets for different goals to stay organized
• Earning interest on money that would otherwise sit idle in a checking account

Savings accounts: Frequently asked questions

A savings account can help you save for everything from a vacation to a new house.

If you have questions about savings accounts, check out the following frequently asked questions for answers, savings tips and application guidance.

How do I open and fund my savings account?

When you open your account, you can bring the funds directly to a branch using a check, cash or debit card. If you'd rather open an account online, you can use your debit card, or you can provide your account/routing numbers to transfer money from another bank account. Usually, you can also open an account via phone with a customer service representative, who will walk you through the funding process and answer any questions along the way.

What is the difference between a checking account and a savings account?

In general, savings accounts allow you to earn interest on your money while most checking accounts do not. Checking accounts are designed to hold money for your everyday expenses, like utility bills and rent, while savings accounts are designed to store and grow money you’re not planning to use in the short term.

Because checking accounts are designed to hold money for everyday expenses, they can offer more flexibility in accessing your money. For example, you can typically make unlimited withdrawals from your checking account as long as you have the funds to cover the withdrawals.

How do I open a Citibank savings account?

You can apply online for most Citibank savings accounts, or you can open a savings account over the phone by calling 1-800-321-2484 (TTY: We accept 711 or other Relay Service). Most Citibank savings accounts can also be opened by visiting your nearest Citi branch. If you're looking to open a Citibank savings account with a special title, such as Trusts, you can do so by visiting a branch.

What do I need to open a savings account?

You should always check with your bank before opening an account, since requirements can vary from bank to bank.

If you're interested in opening a new savings account online, you will typically need to meet the following criteria:

• You must be a U.S. citizen or a U.S. resident alien.
• You must have proof of age and be at least 18 years old.
• You'll need to provide a physical address in the U.S., your date of birth and applicable identification documentation, which may include a Social Security number or individual taxpayer identification number.

How does interest accrue on a savings account?

When you put money in a savings account, interest is the amount your financial institution agrees to pay you for keeping your money with them. It is calculated by applying a periodic rate to the money you have deposited and is based on that bank's interest rate. Typically, you will begin earning interest as soon as your funds are treated as being received by the bank. You should carefully review your account disclosures for details on when interest begins to accrue.

Your savings earn interest when you place money in the account — you don't have to do anything else, although additional deposits will increase the amount of interest you accrue. It can help you reach your financial goals faster. Want to learn more about how interest works? Learn more in our guide to interest rates.

What are some of the advantages of having a savings account?

If you want to save money for your upcoming wedding or honeymoon, a savings account can help you organize your funds and prepare for the big day. You can save for the big and little things in life with the help of interest. It helps to have a goal: Consider saving 10% of each paycheck or putting money aside for your next vacation.

Maintaining a savings account separate from your other accounts can also improve your saving strategy:

• Motivation: See how your money is growing and the progress you're making toward your goals
• Organization: Track your savings as often as you want by managing your account online conveniently

Additionally, Citi is FDIC-insured. Deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, for each account ownership category. To learn more, visit www.fdic.gov.

You can learn more online about Citi’s savings account products and discover how to increase your savings. If you're interested in finding out more about savings accounts in general, read our savings accounts guide.

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.