What's what in finances: Savings account

Bank accounts that pay significant interest, but cannot (or should not) be used directly for transactions. These accounts tend to have higher interest rates than transaction accounts. They can also be linked to transaction accounts for easy transfers and better availability of funds.

It’s generally wise to have a savings account, and they’re mostly free, especially at online banks, community banks, and credit unions. Keeping cash elsewhere that you don’t plan to spend in the immediate future is unsafe, and using a savings account has a psychological benefit: It’s tempting to spend money in hand. A savings account, however, can be a means of setting aside funds to reach longer-term goals.

Savings accounts offer easy access to your cash. Once you’re ready to spend money, you can withdraw cash or transfer funds to your checking account to pay by check, debit card, or an electronic funds transfer. You can make cash withdrawals from your savings account at an ATM or with your bank tellers.

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