A savings account is an effective way to store your money in a secure location where it can earn interest.
With a savings account, you can maintain your savings in a liquid state — meaning you can access your funds whenever you want — while also putting some space between your savings and your daily spending needs.
Get easy access to your funds
Opening a savings account is a simple process. Once you have one, you can make transactions at any time using your bank’s web portal, an ATM or by visiting your local branch. This is a major advantage over long-term investment accounts such as a 401(k) or Roth IRA, which place limits on when and how you can withdraw your funds.
If you have a checking account with your bank, it’s easy to move money between your accounts.* Many banks allow you to connect your checking and savings accounts so you can avoid overdraft fees.
For example, say you use your debit card to make everyday purchases, like fueling your car or grabbing a bite to eat at your favorite restaurant. Your debit card uses the funds within your checking account. If your account hits zero, you risk incurring overdraft fees. However, by connecting your savings account, you benefit from the convenience of automated overdraft protection — if your checking account is overdrawn, any remaining funds necessary for the purchase will come out of your savings account. A fee is associated with this service if elected by most financial institutions. Check with your financial institution for amounts.
Gain peace of mind knowing your money is insured
Savings accounts held at financial institutions that are members of the Federal Deposit Insurance Corporation (FDIC), like Comerica Bank, are automatically insured for up to $250,000. What does this mean?
Essentially, up to $250,000 of your savings is backed by the federal government. Your money is protected against theft or bank failure. Today, it is highly unlikely that an established bank would fail, but it’s important to understand why the FDIC was created. Its history traces back to the Banking Act of 1933. During the early years of the Great Depression, thousands of banks failed and were unable to return money to their customers. The FDIC ensures such a catastrophe is highly unlikely to happen again.
This means that if you deposit your savings into an FDIC-insured account, you have nothing to fear. Up to $250,000 of your funds will always be available to you.
Earn interest on your savings
In general, savings accounts earn interest over time. This means that your money will grow — and you don’t have to lift a finger! Here’s how savings account interest works at a basic level:
To make the math easy, say you put $1,000 into a savings account earning 1% interest. After you deposit your funds, the bank essentially borrows the money and lends it to other customers — but, again, you can always withdraw your money at any time. The bank charges those other customers a higher interest rate for products like loans and financing, in part so that it can pay you the 1% interest on your account. So, at the end of one year, if you deposited no extra money into your account, your balance would be $1,010. The more money you place in the account, the more you will gain in interest.
Keep in mind that your interest rate may be less than 1% — rates depend on many factors, including actions taken by the Federal Reserve System. However, even during times when interest rates are low, it’s still better than leaving your money under your mattress.
Pay your bills on time, automatically
Think of the bills you need to pay each month: Obligations such as your rent, internet and phone bills, utility bills and subscription services may only vary slightly or not at all from one month to another.
Many banks allow their customers to set up automatic payments directly from their savings or checking accounts, meaning you can avoid potential late fees or missed payments. This is especially important for utility bills that could cause a major disruption to your life if you forget to pay them. Automatic payments take some stress out of your life each month.
Benefit from the best of both worlds with a checking account and a savings account
While a savings account is a great place to keep money that you intend to use for major purchases in the future, such as a down payment on a house, checking accounts are better suited for daily purchases. Having both types of accounts makes sense because it allows you to keep your money separate for different purposes. Many people only keep one or two months’ worth of expenses in their checking account and keep the rest in their savings account or other long-term investments.
Comerica Bank offers the Access Checking account, which gives you access to a number of benefits, including zero monthly fees for Comerica Web Banking and no-fee Comerica Web Bill Pay® with direct deposit. Our modest $50 initial deposit requirement makes it that much easier to get started.
*Terms and Fees Apply.