What Is a Savings Account?

By Matthew DiLallo – Updated Dec 12, 2024 at 11:50 AM

Key Points

Savings accounts provide a risk-free option to earn interest, insured up to $250,000 by FDIC.
Interest rates on savings accounts depend on the federal funds rate and may differ by bank.
You can use multiple savings accounts for different goals, making money management easier.

A savings account is an account that earns interest with a financial institution. A savings account carries no risk if it is held at a financial institution insured by the Federal Deposit Insurance Corporation (FDIC) and its value is under the insurance maximum. Savings accounts are a safe place to save money you don’t need immediately.

Here’s a closer look at savings accounts, how they work, their pros and cons, and some examples of how to use them.

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A person holding a jar of money. — Image source: Getty Images.

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FDIC

The Federal Deposit Insurance Corp. (FDIC) is the federal agency that oversees and supervises member financial institutions like banks and thrifts. It is also the insurer for bank deposits.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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