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Advantages and disadvantages of savings accounts

Before deciding if a savings account is right for you, weigh the pros and cons.

If you’re saving for a vacation — or just a rainy day — stashing your money under the bed is only one way to reach your goals.

Most banks offer multiple types of savings accounts to keep your money safe while paying interest to help you reach your goals sooner. With so many options out there, weigh the pros and cons before choosing.

What are the advantages of a savings account?

  • Start with a little. In most cases, you don’t need any money to open a savings account. There’s often no minimum balance requirement and you can make deposits of any size as often as you’d like.
  • Set up an automatic savings plan. This feature automatically transfers a small portion of your paycheck into your savings account when you get paid so that you can “pay yourself first” and develop a habit of saving.
  • Joint accounts. Open a savings accounts with your partner to help you save faster together.

Compare joint savings accounts and meet family goals

  • Easy access to your money. Many savings accounts offer easy access to your account with multiple bank branches, ATM cards, mobile apps and online banking platforms.
  • Earn interest on your savings. Financial institutions pay you interest on your savings account balance, and many accounts offer compound interest, meaning your money can earn its own money. Or, keep switching savings accounts to take advantage of attractive introductory interest rates for new accounts, though most institutions will only allow one introductory offer per customer.
  • Savings accounts are free to open. Most savings accounts cost nothing to open and have no monthly fees.
  • No lock-in period. You’re not locked in for any period of time and you can switch savings accounts as often as you like.

Learn how compound interest can help you save even more money

  • Protect your checking account from overdraft fees. If your savings account and checking account are with the same bank, you may be able to link the two. In the event that there isn’t enough money in your checking account to complete a transaction, funds will be transferred from your savings to avoid overdraft fees.
  • Your money is safe. Banks are known for their well-protected vaults, and if your financial institution goes bust, the FDIC will guarantee your savings account balance up to the value of $250,000.

Learn how banks protect your money

What are the disadvantages of a savings account?

  • Rates can change. One key disadvantage is that savings account interest rates are variable, meaning that financial institutions are free to set and change interest rates as they wish. High-interest savings account rates will stay largely in line with the movements of the federal rate.
  • Temptation to spend. Savings accounts are on-call products, meaning your money is accessible whenever you want it. If you’re looking for more disciplined savings options, a time deposit is an option that restricts your withdrawals.
  • Six-withdrawal limit. Due to Regulation D, savings accounts are limited to six outgoing withdrawals per month. While you’re technically allowed to access your money whenever you want, every transaction above this limit will be accompanied by a penalty fee. However, Regulation D is currently suspended, so check with your bank to see if it’s temporarily waiving its fees.
  • Inflation. If your savings account doesn’t pay a competitive interest rate, inflation could be eating up the value of your earned interest, leaving you with an account balance that’s worth less a year from now than it is in today’s dollars.

Advantages and disadvantages at a glance

FeatureAdvantagesDisadvantages
Interest earnedWith a high-interest savings account, the interest earned on your balance could add up, especially with compound interest.On the flipside, a savings account comes with variable interest rates, which are subject to change. If the Federal Reserve decides to drop interest rates, you could be earning less interest than if you’d deposited your money into a CD or other time deposit.
Easy accessSavings accounts allow you to access your funds whenever you need it – a reassuring feature should you run into emergencies.The ability to access your savings at any time may increase the temptation to spend it. Plus, withdrawals are limited to six per month, so if you go over that limit, the fees can reduce the amount you’re saving.
No lock-in periodYou’re not locked in for any period of time, which means you can switch savings accounts as often as you like.With no lock-in period, there is potentially no incentive to commit to any minimum monthly deposits.

Compare savings accounts

Consider these savings accounts if you decide the advantages of opening an account outweigh the disadvantages. Or, use the table below to compare accounts and the features they offer to find the best fit for your needs.

Aspiration Spend & Save Account logo

Aspiration Spend & Save Account

★★★★★
Axos Bank High Yield Money Market account logo

Axos Bank High Yield Money Market account

★★★★★
Name Product Annual percentage yield (APY) Fee Minimum deposit to open
Aspiration Spend & Save Account
Finder Rating: 3.8 / 5: ★★★★★
Aspiration Spend & Save Account

1.00% on $0 to $10,000 but you’ll need to be enrolled in Aspiration Plus and make at least $1,000 in debit card purchases a month
$0 per month or $15 per month for Aspiration Plus ($12.50 per month if you pay annually)
$10
Deposits are fossil fuel-free and insured by the FDIC. Enjoy a spend and save combo account with unlimited cash back rewards and a $100 bonus when you spend $1,000 in your first 60 days.
Axos Bank High Yield Savings
Finder Rating: 4 / 5: ★★★★★
Axos Bank High Yield Savings

0.61% on $0 to $24,999
0.25% on $25,000 to $99,999
0.15% on $100,000+
$0
$250
No monthly maintenance fees. No minimum balance requirements. Interest compounded daily.
Chime Savings
Finder Rating: 4.6 / 5: ★★★★★
Chime Savings
0.50%
$0
$0
Grow your savings automatically with recurring transfers, round-ups on debit card purchases and 0.5% APY.
Discover Online Savings Account
Finder Rating: 4.6 / 5: ★★★★★
Discover Online Savings Account
0.40%
$0
$0
Take advantage of a high-interest online savings account with no fees, no minimums and more.
UFB Direct High Yield Savings
Finder Rating: 3.6 / 5: ★★★★★
UFB Direct High Yield Savings
0.20%
$0
$100
Earn an APY when your balance is higher than $10,000 with this no-monthly-fee savings account.
SoFi Money
Finder Rating: 4.3 / 5: ★★★★★
SoFi Money
0.25%
$0
$0
SoFi Money® is a cash management account that charges no account fees to save, spend, and earn cash back rewards when you spend on brands you love.
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Compare up to 4 providers

Bottom line

There are several benefits to having a savings account, including introductory interest rates, savings plans and online access. Look at the different ways you can grow your savings before applying for a product. Set-and-forget investments such as CDs can be a handy product to use alongside an on-call savings account.

Frequently asked questions

Who are savings accounts for?

Anyone. Most savings accounts are available to almost everyone, from children to adults and people from abroad to lifelong residents. There are also accounts that are designed for specific people, like children’s savings accounts, student savings accounts, retirement savings accounts and more.

Compare the best student savings accounts

What institutions offers savings accounts?

Savings accounts are available from providers other than banks, including credit unions, credit card companies, insurance companies and even smartphone apps.

How compound interest can affect your savings account.

What does it cost to open a savings account?

It depends. Some institutions don’t require an initial deposit or monthly fee, whereas others might. Consider all fees when shopping around to find a savings account that meets your financial needs.

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