Savings Accounts

A savings account is an account for individuals to save money and earn interest on the cash held in the account. You can open a savings account at a bank or credit union, usually for a nominal fee or even free of charge. The account can be used to save money for specific expenses or for longer-term undefined goals.

There are several types of saving accounts:

  • Passbook or Basic Savings – This is a good starter savings account because it is simple to set up, safe and typically has a very low or no minimum balance requirement. These accounts provide a very low interest rate.  But your money is protected by the federal government with Federal Deposit insurance Corporation (FDIC) insurance.
  • Money Market Savings – This type of account usually offers higher interest rates than a basic savings account, but they also require a higher minimum balance.
  • Money Market Funds – Mutual fund companies offer money market funds that have a small amount of risk, but higher rates of return than a money market account. This type of savings can be good for someone who already has an emergency fund built up, and wants to expand their savings portfolio without a lot of risk.  Since these funds are not held by a bank, they are not FDIC-insured. However, they are invested in very short-term bonds, which tend to be less risky than longer-term bonds. Money market funds that invest exclusively in U.S. government securities have very little risk, while giving you better rates of return then typical bank savings accounts.
  • CD (certificate of deposit) – A CD holds your money for a set period of time at a set interest rate. Interest rates are higher than a basic savings account, but you cannot access your money prior to the maturity date.  Time periods can range from 3 months to 5 years. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned. This may be a good savings tool for someone who has savings they know they will not need to access anytime soon.
  • Online Saving Accounts – This type of savings is becoming more common. Often these accounts pay higher interest rates, but rates and requirements vary widely depending on the financial institution. Shop around to find the account that best fits your needs.
  • Savings Bonds - The U.S. Treasury Department issues savings bonds. They are backed by the government, so the principal and interest will never be lost due to changes in the financial markets. Savings bonds are also free from all state and local income taxes. You can defer federal income taxes on the earnings if you wait until the bond reaches final maturity or when you cash it in. Some savings bonds are even entirely tax free if used for educational purposes.  You can invest as little as $25 (and even smaller amounts from payroll deductions plans).  Savings bonds are available at banks, credit unions or online.  For more information about savings bonds, visit


Tips for Saving

Here are some tips for successful savings that everyone can follow:

  • Determine your saving goal(s) and write them down.
  • Choose a set amount to save each month or pay period.
  • Treat savings as a bill and make it part of your budget.
  • Keep your savings separate from the account you use to pay your bills.
  • Start small – it adds up over time.
  • Use direct deposit to help you save more consistently.