a girl and a piggy bank

Your first experience with saving money may have come from putting spare change in a piggy bank. Over time, the piggy likely got heavier and fuller until one day, you broke it open to buy that toy you had been saving for. This is a good lesson in delaying gratification – putting money aside today to use later. But modern savings accounts offer more than a secure place to store money. Savings accounts allow you to earn interest on the money you save, and when combined with other features, can help you to save for future purchases, pay down debt or prepare for unforeseen expenses.


What is a savings account?

There are many types of savings accounts, but all savings accounts share common features:

● An account where you can securely deposit and store money

● FDIC or NCUA insured, meaning if anything happens to the bank or credit union, the government will insure your account up to $250,000

● You can earn interest/dividends on the money in your account

● Pre-authorized withdrawals from accounts are limited to 6 per month, as dictated by federal law — but this does not include in-person transactions made through tellers and ATMs

Where to start

Financial experts recommend building an emergency savings for unforeseen expenses; the frequently recommended amount is enough to cover three months of your living expenses, but even $500 can be a great help.

Types of savings accounts
Every financial institution offers savings accounts with unique features, but here are a few of the most common: 
  • Youth Savings Accounts — Youth savings accounts typically have a very low minimum deposit, no fees and may offer features that incentivize kids to learn the benefits of savings, such as Advancial’s Money Musketeers Kids Savings Club and Dinero Teens program.
  • Basic Savings Accounts — Basic savings accounts usually offer interest rates from 0.01% to 2.00%. The minimum to open a basic savings account is often very low, at Advancial just a $5 initial deposit is required, but required daily balances can vary widely and may correspond to the interest rate. For instance, maintaining a higher average monthly balance may be tied to a higher interest/dividend rate. While many savings accounts are free, some have fees — often tied to meeting certain conditions such as daily minimum balance, maintaining linked accounts or monthly transaction minimums.
  • Savings Certificates — Savings certificates, also called Certificates of Deposit (CDs), usually offer higher interest rates than basic savings accounts — in exchange for locking in your money for a specified length of time, or term. You can access your money before the term is up, but you will usually pay a penalty for doing so. Often, you can secure higher rates when you deposit larger sums of money. Advancial offers flexible savings certificates so you can set the term for any length of time from three to five years.
  • Money Market Accounts — Money market accounts offer higher dividends on larger initial deposits or tiered rates that change as your deposits grow, with the additional advantage that your money is easily accessible.
  • Individual Retirement Accounts (IRAs) — IRAs are retirement savings accounts with tax advantages. Earnings from the money you deposit in an IRA are tax-deferred until retirement. You can begin to draw money from your IRA without penalty at age 59 ½. There are some limitations on the amount you can deposit each year.
  • College Savings Accounts — 529 Savings Accounts and Coverdell Education Savings Accounts (ESAs) are two accounts specifically intended for college tuition. Both accounts allow you to contribute after-tax dollars with tax-free earning.
Choosing the right account for you

Finding the right savings account depends on your financial goals. Look for the best annual percentage yield (APY) that meets your needs for minimum open, average daily balance and fee structure. Also make sure that your account is easy to use. Saving money isn’t always easy — so choose an account that makes deposits convenient, either online or close to home, or one that links to an existing checking account.

Whatever account you chose, make saving money a financial habit. Check out Advancial Federal Credit Union’s suite of savings accounts and other investment vehicles to get started.