What do savings accounts do

How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate? Savings account rates are generally flexible and can be changed at any time. But some accounts will specify that the currently advertised rate is only available for an initial period of time. Another factor to look for is whether there are minimum or maximum balance thresholds for earning the promoted rate.

How much money is required to open the account and are you comfortable depositing that much at the outset? How much money are you required to keep in the account going forward? You'll want to feel comfortable with always meeting the minimum threshold because falling below it can incur fees or invalidate the interest rate you're expecting. Does the bank or credit union charge any fees on this account?

If so, what are the ways you can avoid it e. Also, if you exceed the federally mandated limit of six withdrawals per month, what is the bank's fee for the violation?

Will the bank allow you to create links between your high-yield savings account and deposit accounts you hold at other banks or brokerages? Are there restrictions on linking multiple accounts or a waiting period for new accounts during which you cannot change your initial linked account? What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an ATM card?

If you expect you'll want to deposit checks into the account, does the bank have a smartphone app that offers mobile check deposit? Otherwise, will you be able to mail in checks or deposit them by ATM? Banks can stipulate that interest will be compounded daily, monthly, quarterly, semiannually, or annually. While more frequent compounding will theoretically increase your take-home yield, if you stick to comparing accounts by APY instead of annual interest rate, the compounding factor will already have been taken into account.

If you're lucky enough to have a competitive high-yield savings account available at your current bank, opening the new account will be a breeze. It will likely be possible through your online banking portal with little need to enter personal information since you will already be verified with the institution. If you're opening a savings account at an institution that is new to you, the process will be more involved, though none of it will prove overly complicated. Almost all high-yield savings accounts can be opened online, so you'll want to set aside 15 minutes or so when you can fill in the electronic application on your computer.

You'll also want to have your driver's license, Social Security Number , and primary bank account information at hand to facilitate the application process. Online banks are offering the highest rates. Still, you may be able to open a high-yield savings account where you already bank. A high-yield savings account can be a useful middle ground for your money, offering protection of your principal, the safety of federal insurance, and a yield that's higher than a regular savings account though less than you could potentially earn from riskier investments.

Just be sure to think through how one or more high-yield accounts can best serve your financial goals and situation. Then, do your homework to find an account that will maximize your earnings at the same time that it lets you avoid fees without imposing restrictions that don't fit your needs. National Credit Union Association. Accessed Oct. Federal Deposit Insurance Corporation.

Federal Reserve. Your Privacy Rights. Plan sponsors Consultants Advisors. How do savings accounts work? But a checking account has another important partner in crime, and that's the savings account. A savings account, like a checking account, lets you keep your money in a safe place. Savings accounts are offered at most banks. Basically if the bank goes out of business, you won't risk losing your money up to that amount—making a savings account a safer alternative to stashing your cash under your mattress.

Stephanie Halligan. Stephanie is the creator of The Empowered Dollar, a website dedicated to helping millennials fix their finances and find their stride in money and life. Take action. Already with TIAA? Manage your money with secure online access. Get online access. New to TIAA? Enrolling is the first step to saving for your future. While investing money is another way to help it grow, putting money into stocks or mutual funds can carry risk.

Savings accounts, on the other hand, can offer a consistent rate of return without putting you at risk of losing money. There are different types of savings accounts you can open, depending on where you decide to bank and what your needs are. Standard savings accounts are the most commonly offered savings option. You can find these at brick-and-mortar banks and credit unions. The weekly national average savings interest rate, as reported by the FDIC , has been 0.

You also may be subject to a monthly maintenance fee or minimum balance fee. These accounts are designed to be a basic savings option. High-yield savings accounts are just what they sound like—savings accounts that offer an above-average APY. In addition to offering higher yields, due to their lower overhead, online banks also may charge fewer fees for high-yield savings accounts.

Money market accounts combine features of a savings account with features of a checking account. This means you can earn interest on your balance, and you also can write checks or make withdrawals and purchases using a debit card. Money market accounts may offer better rates than standard savings accounts, although they are still subject to the six withdrawals per month rule.

You might choose a money market account if you want to have even more convenient access to your savings. These accounts are designed to help children, teens and students learn how to get into a savings habit, can pay interest and may or may not charge fees. Some banks offer special savings accounts that are designed for just one purpose.

So, for example, you might be able to open a savings account just for Christmas savings or to save money for a down payment on a home. For instance, with a Christmas savings account, you may only be able to make a withdrawal once a year in November ahead of the holiday shopping season. A down payment account may offer a matching savings bonus, but only if you get your mortgage from the bank you opened the account with.

A savings account can be helpful for saving money toward various financial goals, and it pays to do your research when opening one. Otherwise, you could end up with a savings account mismatch. For example, either a standard or high-yield savings account could be the right choice for an emergency fund. Also, consider how much money you have to save. Some banks may require you to have a few hundred or even a few thousand dollars to open a savings account.

Next, consider the fees and the APY you can earn with a savings account. Ideally, you should choose an account that has the highest APY with the lowest fees. The more fees you pay, the less of your interest earnings you get to keep. Also, check to see if the APY you can earn applies to all balances. Some banks have interest tiers based on your balance, meaning you have to save more money to get the highest APY.

Online and mobile banking can make your money accessible, but you also may be interested in ATM access or being able to visit a branch. Looking at all the options can help you narrow down which savings account is right for you.

I'm a freelance financial journalist and a regular contributor to U. News and CreditCards.