Savings account - Financial definition
Concise definition of the term savings account
A savings account is a deposit account held at a financial institution that earns interest on the balance maintained. It is typically used to save money and provides easy access to funds while offering a modest interest rate.
Comprehensive definition of the term savings account
A savings account is a fundamental financial product offered by banks and credit unions, designed to help individuals safely store and grow their money. Unlike checking accounts, which are intended for frequent transactions, savings accounts are meant to hold funds that are not immediately needed, promoting financial discipline and savings habits. The interest earned on savings accounts can vary based on factors such as the financial institution's policies, the account balance, and prevailing market interest rates.
Common features of savings accounts often include limitations with regards to withdrawals, the absence of cheques and debit card facilities, limited transfer options, as well as the inability to be overdrawn.
In many countries, savings accounts are insured by government agencies up to a certain amount, providing an added layer of security for depositors. Practical examples include emergency funds, vacation savings, or saving for large purchases like a car or home. Additionally, some savings accounts offer features such as automatic transfers from checking accounts, online access, and mobile banking, making it easier for individuals to manage their savings and achieve their financial goals.