Are Savings Accounts 100% Risk Free? The Answer Is 'No' for These Scenarios

A savings account is one of the most secure places to store and protect your money. The Federal Deposit Insurance Corporation (FDIC) insures nearly all banks up to $250,000 per depositor, per bank. So even if your bank follows the path of Lehman Brothers, Silicon Valley, and First Republic into failure, your savings would be insured up to that amount.

But for all its safety, there are a few scenarios in which your money could be jeopardized. While there are ways to protect yourself, here are three risks you should be aware of.

1. Your account is hacked

Within a bank, money is stored in airtight vaults, hence the elaborate drills Hollywood actors use to break into them. But when it comes to online savings accounts, all one needs is the correct username and password and the vault door will open wide on its own hinges.

But even here you have some protection. Federal law won't hold you liable for unauthorized electronic transfers so long as you report the fraud within 60 days of it showing up on a periodic statement.

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American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 14, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 14, 2024	Min. to earn $0
Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
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On the flip side, you might be liable if you don't report it within 60 days, which is why it's important to monitor your financial accounts. A 60-day window should be plenty of time to catch fraudulent activities, but you can opt in to receive account alerts for transfers and activities if you want extra security.

2. Your ATM card is stolen

Savings accounts don't typically come with debit cards. But some come with ATM-only cards, which can't be used to make purchases but will let you withdraw money from your bank's ATMs. These cards typically require a PIN, but if the PIN and the card are stolen, someone would have access to your savings.

Again, you do have certain protections here, but they depend on when you report your ATM card missing or stolen. According to the Federal Trade Commission, here's what your liability would be:

In sum, if you want full protection for your money, report your ATM card missing or stolen as soon as you realize it's gone.

3. You let a ton of money sit in your account

Money you've set aside for emergencies and short-term savings goals, like buying a house, has a proper place in your savings account. But if you're amassing money for retirement or other long-term goals you might run against another risk: forfeiting the potential for greater returns elsewhere, such as investing in the S&P 500.

This might seem counterintuitive. After all, wouldn't it be more risky to invest in the stock market than to save money at a bank?

Yes, investing in stocks carries the risk of losing money. But don't be fooled: Leaving your money in a savings account for long periods can also carry risks, such as earning interest at a rate below inflation or not growing your money sufficiently to eventually retire.

Over long periods, the S&P 500 has historically generated higher returns than the interest earned in a savings account. For instance, between 2012 and 2021, the average stock market return for the S&P 500 was roughly 14.8% annually. That's a huge difference from the typical APY on a savings account during the same period, which was rarely above 1%.

But putting money into the stock market is risky, which is why it's important to have cash saved alongside your investments. In this regard, savings accounts are some of the safest places to store your cash, as long as your bank is FDIC insured and you protect yourself from the scenarios listed above.