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About Savings Accounts

You can go to any bank and open a savings account. Before you do, shop around and compare fees to open and keep an account. Compare interest rates, too. You may want a bank that is near your house, but since you can access your accounts online, through Automated Teller Machines (ATM), and by phone, that's not so important. You can take care of many bank transactions without stopping at the bank. Shop around to get the best bank for you.


Liquidity is a term that describes how easily and quickly you can take your money out of an account or an investment. All savings accounts let you withdraw your money on the spot. Many savings accounts will even let you withdraw your money using a bank card or debit card. (It looks like a credit card.) The card works in an ATM and gives you lots of flexibility. Using an ATM, you can take money out of your account day or night, any day of the week.

With other kinds of investments, you do not necessarily have this kind of freedom. With some investments, you have to wait until a certain date before you can withdraw money – or pay a penalty for withdrawing it.


Bank savings accounts are FDIC-insured. This means the federal government protects your money up to $250,000 in a single account. If anything happens to the bank that keeps your money, the federal government would replace the money you lost – if the amount is $250,000 or less.

Compound interest rates

Most savings accounts pay interest on the money in your account – and on any interest you've already earned. That's called compounding. Compounding usually happens annually. Many savings accounts compound more often, like four times a year. That's better. The more times your interest compounds, the faster your money will grow.

Take an example.  Let's say you put $1,000 in savings. Interest is compounded four times a year. Here's what your money would do:
                                                          $ In the account                Interest earned at 3.5%
January                                                $1,000                                                  $8.75
April                                                       $1,008.75                                            $8.83
July                                                        $1,017.58                                            $8.90
October                                                 $1,026.48                                            $8.98

In one year's time, you've earned $35.46. And you haven't had to work for it. It's like magic. And did you notice that each time you earned interest, you earned more than you did the last time? Your interest will get larger and larger as time goes on.

Use the Compounding Calculator to see this in action.

Did you know?

Keep a money diary that tracks what you save and spend. It will tell you about when, why, and how you use money.