What is a savings account?

A savings account is defined as a deposit account offered by financial institutions that allows individuals to save money while earning interest on their balance. This type of account is typically used for short-term saving goals and encourages individuals to set aside funds for future needs or emergencies.

The key features of a savings account include the ability to earn interest, making it an appealing option for individuals looking to grow their savings over time. The interest rates can vary between institutions and can either be fixed or variable, but the primary function remains to provide a safe place for depositing funds while generating some return.

Unlike checking accounts, which are designed for everyday transactions and may not earn interest or earn very little, savings accounts limit the number of withdrawals or transfers you can make each month to encourage saving. Additionally, they differ from investment accounts, which typically involve buying stocks or other securities, and are also not intended for taking loans but rather for holding funds securely with the potential for growth through interest accrual.