What is a Savings Account?

Now that you know why saving is important, let’s learn what a savings account is!

A savings account is an agreement between a bank and a depositor (you)! You deposit your money in the bank in exchange for interest and safekeeping. In other words, the bank pays you money just for putting it in a savings account.

There are two main types of savings accounts…traditional savings accounts, and certificates of deposit (CD’s).

A traditional savings account, sometimes called either a statement or passbook savings account, allows you to deposit and withdraw money at anytime. This type of savings account does not have a maturity date.

A certificate of deposit is a savings account which usually allows you to make only one deposit at the time you open the account, and you can only withdraw your money at its maturity date. However, because of these limitations, the interest rate on a CD is often higher than the interest rate on a traditional savings account.

Talk to your mom or dad and find out if you already have a savings account set up at a bank. If not, there is not a better time to start one! All it takes is a little help from your mom or dad, some money for your first deposit, and a visit to the bank. It is that easy!