Saving Accounts 101

lindsay giguiere, adding funds to your savings account

When you think of a savings account, you think of a place to store money you’ve saved. As my daughter would say, “Duh.” Sounds simple enough, but do you know how they work? There’s more to it than placing your extra money in an account. What are the pros and cons? Is a savings account the right choice for you? How has COVID impacted savings accounts?

According to, “A savings account is a basic type of bank account that allows you to deposit money, keep it safe, and withdraw funds, all while earning interest.” Why would someone choose this account instead of keeping their money under their mattress? That money is just collecting dust and bed bugs, not more money. It’s also quite tempting in terms of accessibility. Why not make money with your money?

Advantages of a Savings Account

“Savings accounts, on the other hand, can offer a consistent rate of return without putting you at risk of losing money,” says The reason for the low risk is you’re not investing your money, but rather putting it somewhere safe for a future purchase or emergency fund.

I don’t know about you but if I have money in hand, it’s pretty hard not to spend it. Even though accessing a savings account to withdraw money is very easy, it’s still one more step than lifting the mattress to grab a few Benjamins. As Puff Daddy sang, It’s all about the Benjamins baby.

While your money is collecting dust at the bank, it’s earning interest. We typically hear about the interest we have to pay to borrow money, such as for a credit card. Well, this is the opposite. When your money is sitting in a savings account, the bank is using that money and paying you interest in return.

When shopping around for a home for your savings, you want to look for an account that will offer the highest Annual Percentage Yield (APY) with the lowest fees. tells us “the more you pay, the less of your interest earnings you get to keep.”

Always read the fine print because you can end up paying more in fees than you’re earning in interest. In such a case, that mattress looks pretty good, dust bunnies and all.

Interest rates are always shifting to curb high levels of inflation or boost the economy during a recession. When they’re low, it means you owe less, but you also get less. When they are high, it means you owe more, but you get more.

I mentioned that a savings account is a safe place for your money but what does that actually mean? Well, if your house goes up in flames, that mattress and money are poof, gone. If the bank goes up in flames, your money is protected or what is known as FDIC-insured.

The Federal Deposit Insurance Corporation is an independent agency of the U.S. government that protects you against loss of deposit if your bank fails. “The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category,” as the FDIC explains. A nice convenience is you don’t have to purchase deposit insurance as you are automatically covered.

Disadvantages of a Savings Account

Any interest you earn from your savings account is considered taxable income by the IRS. Since an average savings account earns only .05% APR, you’re not going to be taking home much. Add in minimum balances, taxes, and fees, and it’s not an advantageous scenario.

There are ways to find higher returns from a savings account and one example is to choose an online account versus a brick and mortar branch. Since there are low overhead costs, usually balance obligations and fees are waived.

The pandemic has had a huge impact on finances. Interest rates have dropped to an all-time low and in January of 2021, the Federal Reserve said it would “keep its benchmark interest rate near zero until the economic recovery gains ground.” If you’re looking for a mortgage, you’re in luck. If you’re looking for a nice return on your savings account, not so much.

COVID has brought a new outlook for many when it comes to money. It proved that at any moment, life can change and you can lose your job or have to quit your job. In a report commissioned by McKinsey and Company titled, “Women in the Workplace 2020,” due to challenges created by COVID, “Companies are at risk of losing women in leadership positions, as nearly two million women are considering leaving the workforce.” With schools closed or open part-time, and daycare centers and after-school programs not operating at full capacity, years of painstaking progress toward gender diversity have been undone.

How to Build up Your Savings

If you’re going to stick it out with a savings account, there are various ways to get that money in there.

  • Automate a specific percentage of your paycheck into your savings account.
  • With a round-up feature, “every time you make a purchase with a checking account debit card, the bank will round up that purchase to the nearest dollar and transfer that amount directly into your savings account.”
  • A good rule of thumb is to keep enough savings to cover three to six months of living expenses.

If you want more out of your money, yet with a higher risk, there are plenty of options like a high-yield savings account where the APY is much higher than a traditional savings account. These are typically seen from online banks only.

Another option is a certificate of deposit (CD), which locks in your rate at the time of opening. This is a good thing right now, but when rates go up, you won’t be able to take advantage of them.

The bottom line is savings accounts are a great place to sock away money for a rainy day. If you’re looking to make money with your current money, you’re simply not going to earn much with interest rates so low at the moment.

At a time of uncertainty, savings accounts are a secure way of putting money aside. If you’re looking for more bang for your buck, talk to a financial advisor to discover alternative ways of using your money to benefit your future.

Hope You Enjoyed the Read!

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Authored By: Lindsay Giguiere

Lindsay is an entrepreneur, influencer, and advocate with a passion to help women and their loved one’s thrive beautifully.


  1. Reading your article has greatly helped me, and I agree with you. But I still have some questions. Can you help me? I will pay attention to your answer. thank you.

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