Explain it Like I’m Five: How Do Savings Accounts Work?

Explained like you’re 5: What is a savings account?

A savings account is a deposit account offered by a bank, credit union or fintech company.

Customers can put their money into savings accounts for safekeeping, and savings accounts get deposit insurance with the government. And on top of that, the bank pays you money for keeping your funds in the account.

Savings accounts earn interest on your balance, and your interest earnings are a percentage of that balance. The higher your balance and the higher your savings interest rate, the more money you can earn over time.

Why do banks pay interest on savings accounts?

Banks need customers to deposit money into their accounts, because banks use that money to lend money to other people, make investments and more.

To get people to use their products and services, they pay customers interest on their savings balances in exchange.

How much do savings accounts earn?

Your balance and your interest rate drastically change how much your savings can earn over time.

For example, the average interest rate on a savings account in the US is 0.38%.⁽¹⁾ If you had $1,000 in a savings account with a 0.38% annual percentage yield (APY), you would earn around $4 in one year.

You might think that $4 isn’t much, and you’d be right. Let’s kick it up a notch.

If you have a savings account with a 4% APY and a $10,000 balance, the interest earnings would total around $400 after one year.

The more you deposit and the better rates you find, the more you will earn over time.

When do I get my savings earnings?

The timing depends on the bank. It may deposit your interest earnings daily, monthly or yearly.

When comparing savings accounts, you likely see phrases like “interest compounds daily” or “earnings compound daily, deposited monthly.” These phrases tell you how your interest compounds and when the bank deposits it into your account.

For the fastest and most efficient earnings, look for savings accounts that compound and deposit daily. Daily compounding and depositing means that your savings earn interest every day, and the bank deposits those earnings every single day.

Are savings accounts free?

Yes, you can definitely find a free savings account. There are plenty of savings accounts without monthly fees.

Some bank accounts charge monthly maintenance fees, which are basically fees to keep the account open and support the bank. However, many online banks like SoFi® or Ally don’t charge these fees, since these banks don’t have physical branches they need to maintain.

9 Excellent

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SoFi Checking and Savings

With SoFi Checking and Savings get paid up to two days early. Set up direct deposit to automatically get your paycheck up to two days early every time you get paid

• Up to 3.30% APY on savings by meeting deposit requirements or by paying the SoFi Plus subscription fee every 31 days
• Get a $50 or $400 bonus depending on direct deposit amounts
• $0 account or overdraft fees

Partner terms and conditions

New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more) OR $400 (with at least $5,000 total Eligible Direct Deposits received within 25 calendar days of your first Eligible Direct Deposit of $1 or more). Cash bonus amount will be based on the total amount of Eligible Direct Deposit received within 25 calendar days of your first Eligible Direct Deposit of $1 or more. If you have satisfied the Eligible Direct Deposit requirements but have not received a cash bonus in your Checking account, please contact us at 855-456-7634 with the details of your Eligible Direct Deposit. Direct Deposit Promotion begins on 5/15/2026 and will be available through 12/31/2026. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC. SoFi members with Eligible Direct Deposit can earn 3.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Eligible Direct Deposit amount required to qualify for the 3.30% APY for savings (including Vaults). Members without Eligible Direct Deposit will earn 0.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 9/23/26. Fees may reduce earnings. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 9/23/26. 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

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/.

SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

We’ve partnered with Allpoint to provide you with ATM access at any of the 55,000+ ATMs within the Allpoint network. You will not be charged a fee when using an in-network ATM, however, third-party fees may be incurred when using out-of-network ATMs. SoFi’s ATM policies are subject to change at our discretion at any time.

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.

Overdraft Coverage is a feature automatically offered to SoFi Checking and Savings account holders who receive at least $1,000 or more in Eligible Direct Deposits within a rolling 31 calendar day period on a recurring basis. Eligible Direct Deposit is defined on the SoFi Bank Rate Sheet, available at https://www.sofi.com/legal/banking-rate-sheet. Members enrolled in Overdraft Coverage may be covered for up to $50 in negative balances on SoFi Bank debit card purchases only. Overdraft Coverage does not apply to P2P transfers, bill payments, checks, or other non-debit card transactions. Members with a prior history of unpaid negative balances are not eligible for Overdraft Coverage. Eligibility for Overdraft Coverage is determined by SoFi Bank in its sole discretion. Members can check their enrollment status, if eligible, at any time by logging into their account through the SoFi app or on the SoFi website.

Earn up to 4.40% Annual Percentage Yield (APY) on one SoFi Savings account with a 1.10% APY Boost (added to the 3.30% APY as of 10/20/26) for up to 6 months. Open your first SoFi Checking and Savings account and receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 12/31/27. Rates are variable, subject to change. Terms apply at sofi.com/banking#4. SoFi Bank, N.A. Member FDIC.

How do I get started with savings accounts?

You need to be at least 18 in most states to open a bank account. When opening a savings account, you’ll need some basic information about yourself, including:

• Name and birth date
• Government ID
• Home address
• Social Security number or ITIN
• Contact information, such as phone number and email address

If you’re a minor, you’ll need an adult to open a savings account with you.

Compare top savings accounts

Narrow down top savings accounts by monthly fees, interest rates and perks. Tick the Compare box on multiple accounts to view them side by side.

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6 of 19 results

Finder Score	Account type	Annual Percentage Yield (APY)	FDIC or NCUA insured amount	Minimum balance to earn APY	Minimum deposit to open
Promoted 9.2 Excellent Public High-Yield Cash Account	9.2 Excellent	Cash management account	3.30%	Up to $250,000	$0	$0	Go to site View details Compare product selection Compare	loading
Promoted 9.4 Excellent Wealthfront Cash Account	9.4 Excellent	Cash management account	3.55%	Up to $8M FDIC insurance	$1	$1	New clients earn can earn 4.45% APY. New clients get a boosted APY from 3.55% to 4.20% APY for 3 months on up to $150,000. Can also earn ongoing 0.25% APY increase for monthly direct deposit of $1,000 or recurring deposits of $2,500 for a total 4.45% APY with both APY boosts. T&Cs apply.	Go to site View details Compare product selection Compare	loading
Promoted 8 Great CIT Bank Platinum Savings	8 Great	Traditional savings	Up to 3.75%	Up to $250,000	$0	$100	Earn up to 4.35% APY. Get a 0.60% boost to the standard Platinum Savings APY for six months. The boost applies when an eligible customer opens a new Platinum Savings account or enrolls a qualifying Platinum Savings account using promo code BOOST60, subject to promotion terms. APYs are variable and may change. T&Cs apply.	Go to site View details Compare product selection Compare	loading
9.2 Excellent SoFi Checking and Savings	9.2 Excellent	Traditional savings,Checking	Up to 3.30%	Up to $250,000	$0	$0	Earn up to 4.40% APY on savings and $50 or $400 with direct deposit. Open a new SoFi Checking and Savings account by 31 December 2026, set up eligible direct deposit within 60 days, and maintain direct deposit for six months. 1.10% Boost on Savings APY to up to 4.40% for up to 6 months on new accounts. T&Cs apply.	Go to site View details Compare product selection Compare	loading
9.7 Excellent Live Oak Bank through Raisin	9.7 Excellent	Traditional savings	4.10%	Up to $250,000	$0.01	$0	Up to $1200 with code SUMMER26. T&Cs apply.	Continue View details Compare product selection Compare	loading
Not scored yet Robinhood Banking	Not scored yet	Cash management account	3.60%	up to $2.5 million	$0	$0	Continue View details Compare product selection Compare	loading

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Showing 6 of 19 results

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How we picked these

What is the Finder Score?

The Finder Score crunches over 250 savings accounts from hundreds of financial institutions. It takes into account the product's interest rate, fees, opening deposit and features - this gives you a simple score out of 10.

To provide a Score, Finder’s banking experts analyze hundreds of savings accounts against FDIC-reported national averages as a baseline. Accounts with rates well over the national average are scored the highest, while accounts with rates well below are scored low.

Read the full breakdown

Bottom line

Savings accounts are places you can store money for safekeeping. They are federally insured, typically up to $250,000, and they earn interest. How much you earn on your savings balance depends on how much you deposit and the account’s interest rate.

Compare more bank accounts, such as checking, CDs and business banking.

Frequently asked questions

• Do savings accounts require a certain balance?

  Sometimes, yes. Some savings accounts require a certain balance, like $5 or $100, to earn the best interest rate, waive a monthly fee or just keep the account open.
  In general, savings accounts are pretty low-maintenance, especially compared to checking or business accounts. Read the fine print to be sure you know what to expect and any daily requirements you need to maintain.

• What are high-yield savings accounts?

  High-yield savings accounts, or HYSAs, work just like regular savings accounts, but they have a really high interest rate. Many HYSAs come from online banks.

• Can I earn money on my savings with a zero balance?

  Nope. Interest earnings on savings accounts are a percentage of your balance, and 0% of $0.00 is zero. If you want to earn interest on your deposits, you'll need to deposit something. You'll find that most banks will require a balance of at least $0.01 to $5 to earn interest.

• Do I get a debit card with a savings account?

  No. A few savings accounts offer ATM cards, but those just let you check balances or withdraw cash from an ATM — they don't allow for spending. If you want an account that can spend and earn interest on your balance, consider a money market account or an interest-bearing checking account.

To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.

Written by

Bethany Hickey

Banking editor

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Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio

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Bethany has written 474 Finder guides across topics including:

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