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What is a Savings Account?
A savings account, also known as a savings deposit account, is the simplest way to set aside money for your future needs – from a vacation to buying a home. Think of it like a piggy bank that pays you interest. Plus, savings accounts are one of the most secure ways to keep and grow your money.
How do savings accounts work?
Putting your money in a savings account usually lets it work harder than if you left the same money in your everyday checking account. When you put your money in a savings account, the bank will pay you a higher percentage of interest each year than you'll make with most checking accounts.
The key benefits of savings accounts
- The best thing about a savings account is that it lets you earn interest on money that you don't need for your daily or monthly expenses. It's also a handy way to put aside money that you'd like to keep for a long-term financial goal.
- Money in a savings account is easy to access when you do need it. There's usually no waiting time for withdrawals and, unlike some Certificates of Deposit, there are no penalties for early withdrawal.
- A major benefit of savings accounts that you can access online, is that most banks allow you to set up automatic deposits. This is a fantastic way to steadily build up savings each month, without you even having to think about it.
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Other savings account considerations
For one thing, banking regulations limit you to six transactions a month before you have to pay a fee. Some banks may have differing rules for transactions made at or teller windows in banks, so it's best to check with your financial institution about their specific rules. Withdrawal limits are there to make sure your savings account is actually used for saving. If you need to spend that money more frequently, you may want to keep it in a checking account.
If you're putting away more than a few hundred dollars a month, it may be worth seeking a higher return with a Certificate of Deposit, a Money Market Fund, a brokerage account, a high-yield savings account, or even an interest-bearing checking account.
You can view Citi's savings products if you'd like to explore your options further.
How much should I keep in a savings account?
Savings accounts can also be considered as rainy-day funds. As a rule of thumb, you should aim to keep three to six months of living expenses in a savings or other account where the money is easily accessible. To get started, aim for just $500 to $1,000. That's usually enough to start saving for something important, and it's also a nice reserve to have should you suddenly need cash.
Opening a savings account
Go to a bank branch or visit your bank online. Be sure to have at least one government–issued photo ID, like a driver's license or passport, and your Social Security number. Some banks may ask for proof of your home address, such as two recent utility bills, phone bills or rent receipts.
Most banks require that at least one account holder should be 18 years of age or older. A parent or guardian can also share a savings account with a minor. Talk to your bank's branch manager about other savings products for minors.
Citi allows you to open a savings account, online in branch or over the phone.Savings account fees
Some savings accounts require a minimum deposit, sometimes as low as $25, to avoid paying a monthly fee. Many banks will waive the fees or minimum deposits on savings accounts if you also have a checking or investment account with the same bank.
How do I put money in a savings account?
You can put cash or checks into your account at a bank branch or an . Checks can also be deposited by mail or by taking a picture of the check with your bank's smartphone app. You can also move money from other accounts, such as your checking account, into your savings accounts. Most banks don't charge for this service.
Many employers who use direct deposit will let you split your paycheck between your checking account and your savings account, so the money you want to save never even enters your checking account.
Can I have more than one savings account?
Yes. Some people find it easier to save if they keep a separate account for each major savings goal - say a new home, a child, a vacation or an emergency fund. The advantage to having multiple savings accounts is that it's easier to track your progress toward your financial goals.
Are savings accounts insured?
Make sure the bank where you open your savings account is a member of the Federal Deposit Insurance Corporation (FDIC). If your bank fails, the FDIC insures up to $250,000 in each account holder's accounts in a member bank, and member banks are generally safer than banks that are not members. All Citi saving accounts are insured by the FDIC, which can help to give you peace of mind as you build up your savings pot.
Different types of savings accounts
Besides the standard savings deposit account, most banks offer nearly a dozen other kinds of accounts in which you can save money:
- Jumbo savings accounts are usually for people who can afford to keep deposits of $100,000 or more in their accounts, and they often offer better interest rates.
- High-yield savings accounts offer better interest rates than savings deposit accounts, but may require a larger minimum deposit.
- Rewards savings accounts offer special incentives tied to things like starting a new account or reaching specific balance levels.
- Joint savings accounts are savings accounts held by two or more people.
- Student savings accounts may offer more flexible terms, such as lower minimum balance requirements for students enrolled in college or high school.
- Certificates of deposit (CDs) are deposit accounts that require you to commit your savings for a specified time period, usually three months to five years, and offer higher interest rates. If you withdraw your money before the end of the specified term, you will likely have to pay a penalty.
- College savings accounts (529 plans) allow students and parents to save money for higher education expenses, including tuition, fees and even room and board. Contributions are allowed to grow tax-free and distributions from these accounts are not taxable as long as they are used for qualified educational expenses.
- Coverdell education savings plans are like 529s for grade school and high school education, but contributions to these plans are limited to $2,000 a year.
- Individual retirement accounts (IRAs) and 401(k) plans let you deduct money from your income before paying taxes on it and put it away for retirement. Investment earnings may grow tax free or tax deferred, but earnings and pre-tax contributions distributed are taxed at ordinary income rates.
- Roth IRAs let you contribute after-tax income to a retirement account, but distributions are not subject to taxation if they are qualified distributions which meet certain conditions.
- Health savings accounts (HSAs) can let you put aside pre-tax income for medical expenses. Generally you need to have a high income and be enrolled in a high-deductible health plan to participate.
The article content provides general information about banking, however consumers should refer to the terms and conditions financial institutions provide for various products.
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