Savings Account

What Is A Savings Account?

A savings account is a bank account that allows customers to save money and earn interest on it. 

Deeper Definition 

A savings account is a bank account that allows customers to deposit money for safekeeping and withdraw funds when needed, all while earning interest.

It is a basic account, often with several limitations compared to other types of bank account. However, it is an excellent option for customers who need a place to keep their money safe. Some savings account limits include transfer options, limits on the number of withdrawals, and a lack of cheques.

Some of the limitations on saving accounts are there to force customers into developing a saving habit. For instance, customers may choose to go above the monthly number of recommended withdrawals.  In doing so, the penalty could be an extra charge from the bank or a forfeit of interest accrued for that month.

Virtually all commercial banks offer customers the option of creating a savings account. That is because the deposited funds often serve as a source of funds for banks to lend money out to other customers.

Interest earned on savings accounts is usually moderate and varies depending on the bank. Most times, banks offer a higher interest rate to customers who deposit high amounts of money. You should note that interest earned on savings is also taxable income.

Savings accounts are a safe place to put your money. Opening a savings account today is quite simple. For most banks, you can complete the process of opening this type of account at the comfort of your home through the bank’s website or mobile app. Some banks also allow customers to operate more than one savings account to save for different goals.

The requirements for opening often vary depending on the bank. In most cases, banks require a valid means of identification. Some banks have a minimum opening balance potential customers must meet before opening an account, while some don’t. 

Saving Account Example

John wants to put money to one side to handle various future expenses. He enters the Bank of America and is offered a savings accounts. This account offers a higher rate of interest than his current account as long as the money remains in the account for longer periods of time. John provides his I.D and decides to deposit a high amount of money to use in the future.