Six Advantages of Having a Savings Account

Sure, you could store all the cash you’re likely to need in the near future in a checking account and call it a day. But that would mean missing out on the many benefits of having a savings account.

While savings accounts may not offer the returns you could potentially get in the market, they pay interest (generally more than you can earn in a checking account), while keeping your money safe and accessible. This makes them ideal for storing your emergency funds and money you’re saving for shorter-term goals, such as buying a car or going on vacation.

Here’s a closer look at the perks of having a savings account and why this type of account likely deserves a place in your financial toolkit.

What Savings Accounts Are

A savings account is a type of deposit account at a bank, credit union, or other financial institution where you can safely store your money and earn interest. Savings accounts at banks insured by the Federal Deposit Insurance Corporation (FDIC) are typically covered up to $250,000 per depositor, per insured institution, per ownership category. Co-owners of joint accounts at the same bank are typically each insured up to $250,000. Credit unions offer similar insurance through the National Credit Union Administration (NCUA).

Unlike a checking account, which is set up for everyday money management, a savings account is designed to store money you don’t need right away. These accounts usually don’t come with checks and debit cards, and some banks may limit you to a certain number of withdrawals per month.

Because savings accounts offer safety, liquidity, and interest, they can be a great place for setting aside money for shorter-term goals, such as:

•   Establishing an emergency savings fund

•   Putting a down payment on a house

•   Paying for a wedding

•   Funding a vacation

•   Buying a new car

•   Renovating your home

Six Benefits of Savings Accounts

Here’s a look at some of the main advantages of a savings account.

1. You Earn Interest on Your Deposits

Savings accounts earn interest, expressed as an annual percentage yield (APY). That means you earn money just for keeping your funds in the bank, making it a low-risk way to build wealth. Not every savings account offers the same interest rate, however. While the current national average savings yield is 0.38%, top-yielding savings accounts are currently earning APYs above 3.00% percent.

To see how that translates into actual dollars, let’s say you currently have $5,000 sitting in your checking account you don’t need immediately, you could transfer those funds to a 3.50% APY high-yield savings account. Even if you don’t add any additional money to the account, your balance could increase in one year to $5,177.83 (assuming it compounds monthly), just by letting the initial deposit sit in the savings account.

2. Your Money Is Insured

Savings accounts are typically insured by the FDIC or NCUA, depending on where the account is held. That means your money is protected against major losses, as noted above, in the event that the bank or credit union goes out of business. You would either receive payment directly or, more likely, a new account may be opened for you at another bank with the same balance as before. This makes a savings account safer than keeping your money in a sock drawer or under the mattress, where it is susceptible to theft or loss.

3. It’s Low Risk

Savings accounts don’t offer high returns compared to what you could potentially make in an investment account over the long term. However, savings accounts don’t come with the same level of risk. With investments, you can potentially lose money, including your principal, over the course of days, weeks, months, and even years. The balance on a savings account, on the other hand, will typically continue to grow over time due to compound interest (unless, of course, you make a withdrawal). In addition, investments are not insured by the FDIC.

If you have money you plan to use within the next couple of years that you can’t afford to lose, a savings account may be the best place to store it.

4. It Doesn’t Require a Large Initial Deposit

Savings accounts are easy to open and typically do not require a big initial deposit, so you can start saving from the ground up. Many online-only savings accounts allow you to open an account with $0, while traditional brick-and-mortar banks may require deposits of $25 to $100 to open a new account.

Keep in mind, though, that some savings accounts do offer higher interest rates and low (or no fees) if your balance stays above a certain minimum threshold or you meet other criteria.

5. You Can Separate Money for Different Goals

If you’re saving for a particular goal, such as buying a car or putting a down payment on a home, it can be helpful to keep that money in a separate savings account. This helps to ensure that you don’t use the money on something else, like groceries or clothing.

If you have several things you’re saving for — such as an emergency fund, a new car, or a vacation — you might even want to open multiple savings accounts. Separating money can help you visualize progress toward each goal. Some savings accounts let you organize your savings into separate buckets, or “vaults,” so you can save toward multiple goals within one account.

6. Easy Access When You Need It

Savings accounts are relatively liquid, meaning you can access your money when you need it by transferring it into your checking account or withdrawing it at an ATM or through a teller at a local branch. That’s not true for many investments, which may take a few days to convert to cash. Some investment products, such as real estate properties, can potentially take months or years to sell off.

That makes a savings account an ideal spot for your emergency fund. When an unexpected expense comes up, you can access your funds immediately — and avoid running up expensive credit card debt — in order to cover it.

That said, the money is not quite as accessible as the money in a checking account. Savings accounts typically don’t come with checks and debit cards, and some banks limit the number of withdrawals you can make to six or nine per month. However, you might see these limitations as benefits, since they encourage saving rather than spending.

Recommended: Can You Write Checks From a Savings Account?

Is a Savings Account Right for You?

Savings accounts offer numerous benefits, including insurance on your deposits, higher APYs than checking accounts, and liquidity. Plus, you generally don’t need a large (or sometimes any) initial deposit to get started.

However, the interest you earn on a savings account may not always keep up with inflation, which means your balance could become less valuable over time. As a result, a savings account is generally not the best place to put money you are saving for a long-term goal, such as retirement or your child’s college education. You might potentially earn a better return over time if you instead put that money in a diversified portfolio. Investments are higher risk, however, and come with the risk of losing principal, as well.

If you’re interested in opening a savings account, it’s a good idea to research your options and compare APYs, minimum deposits, balance requirements, and any fees. If you have a savings account but aren’t satisfied with the perks, there’s likely a better fit for you that still offers the full benefits of a savings account.

Recommended: Perks of Long-Term Savings Accounts

The Takeaway

Savings accounts provide a secure, liquid, and low-risk way to build your savings through the interest earned over time. Unlike checking accounts, which are designed to make funds readily accessible on a day-to-day basis, savings accounts are ideal for storing money for goals in the not-too-distant future, such as a wedding or a down payment on a house. They also typically offer protection via FDIC or NCUA insurance. They may not offer the potential returns that other financial products may offer, but their accessibility and safety make them an important component of a financial toolkit.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, named the #1 Bank in the U.S. for the fourth year in a row by Forbes (2026).* Enjoy up to 3.10% APY on SoFi Checking and Savings.

FAQ

What is the benefit of a savings account?

The primary benefit of a savings account is that it allows you to build your savings over time (by earning interest), while keeping it safe and accessible. This allows you financial flexibility in case of unplanned expenses, but you can still save up for important goals in the near term.

What are the advantages and disadvantages of a savings account?

Advantages of savings accounts include:

•   Earning interest: Deposited funds accrue interest, helping your money grow over time.

•   Safety and security: Funds in savings accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC or National Credit Union Administration (NCUA), providing protection against loss in the rare case of a bank failure.

•   Liquidity: Savings accounts funds can be accessed quickly, making them ideal for emergency savings.

Disadvantages of savings accounts include:

•   Lower interest rates: While savings accounts offer interest earnings, the interest may be lower than the potential interest or returns you might see in other financial products that might be higher risk.

•   Inflation risk: Inflation may erode the purchasing power of your savings over time, especially if the interest earned does not keep pace with inflation.

•   Fees and minimum balance requirements: Some savings accounts may have fees or minimum balance requirements, potentially reducing the overall return on your savings.

How is a savings account most useful?

Savings accounts can be most useful for storing your emergency funds and money you plan to spend in the next few months or years, since they pay interest while keeping your funds safe and accessible. However, interest on savings accounts are often lower than the returns you may potentially earn through other higher-risk financial products. That makes these accounts less useful for long-term savings goals, such as retirement or a child’s future college education.

---

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2026 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 5/28/26. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet. We do not charge any account, service, or maintenance fees for SoFi Checking and Savings. We do charge transaction fees for outgoing wire transfers, Instant Transfers, and global remittance transfers. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/. *Awards or rankings from Forbes are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOBNK-Q126-017