Savings Accounts

Learn all there is to know about savings accounts from regular passbook to high yield to HSAs. Discover where to get the best interest rates, how they are taxed, and how a savings club works.

Frequently Asked Questions
  • What makes a savings account a high-yield account?

     A savings account is considered high-yield if it pays more than a financial institution’s regular demand deposit or passbook savings accounts.  High yield savings accounts are typically money market savings accounts that are limited to six withdrawal transactions per month.

  • Are savings accounts subject to income tax?

    Interest earned on savings accounts is reported to the IRS by commercial banks and other financial institutions and therefore is subject to federal income tax as regular income. Interest is reported on Form 1099 to bank customers, typically in January each year for the previous tax year.

  • How do savings accounts differ from a Roth IRA?

    Both savings accounts and Roth IRAs are funded with after-tax dollars by individual investors. However, unlike savings accounts, any capital appreciation earned with a Roth IRA is not subject to federal income tax. Growth in savings accounts, in the form of interest, is subject to taxation.

  • How is interest calculated on a savings account?

    Simple interest for a savings account is calculated by multiplying the account balance by the stated interest rate and then multiplying by the time period the money is in the account. Interest = Principal amount X Interest Rate X Time Period.

  • How is a savings account different from a checking account?

     A savings account is different from a checking account in that it is meant for accumulation of funds and earning interest rather than being a transaction account accessible with checks and debit cards. Savings accounts can be freely accessed by the account holder through deposits and withdrawals on demand and generally pay higher interest than checking accounts but are not designed for payment transactions.

Key Terms

Explore Savings Accounts

Best Savings Accounts for Kids
Best Savings Accounts for Kids
How Is a Savings Account Taxed?
How Is a Savings Account Taxed?
Sweep Account
Sweep Accounts Definition: Types and How They Work
The Best Alternatives to Bank Savings Accounts
The 5 Best Alternatives to Bank Savings Accounts
Person depositing money into the bank
Term Deposit vs. Demand Deposit: What's the Difference?
Opening a Bank Account When You're a Resident, But Not a Citizen, of the U.S.
How Foreigners Can Open Savings Accounts in the U.S.
Annual Equivalent Rate: The interest rate for a savings account or investment product that has more than one compounding period.
Annual Equivalent Rate (AER): Definition, Formula, Examples
Current Account Savings Account (CASA)
Current Account Savings Account (CASA): Definition and Formula
Graph on rows of coins for finance and banking on digital stock market financial exchange and Trading graph
Transaction: What it Means, How it Works, Example
Little girl with money jar labeled "college"
Savings Account vs. Roth IRA: What’s the Difference?
Money Market Fund vs. MMA vs. Savings Account: What’s the Difference?
Medical Savings Account (MSA): Meaning, History, Types
What to Know About Foreign Savings Accounts
Foreign Savings Account: What it Means, How it Works
How to Open a Swiss Bank Account & Advantages in Having One
4 Savings Accounts for Investors
Savings jar with coins in it
Individual Development Account (IDA): What it is, How it Works
Over the shoulder view of a person looking at bank account information on their smartphone
CDs vs. MMAs vs. Savings Accounts
A woman sits at a computer, considering her finances.
Chase Savings Account Interest Rates: November 2023
IBAN vs. SWIFT Code
IBAN vs. SWIFT Code: What's the Difference?
Coins in a bottle and the green tree, Represents the financial growth. The more money you save, the more you will get.
Deposit Interest Rate: Definition, Fixed Vs. Variable
A couple sit together at a couch with a tablet computer and paperwork, analyzing their finances.
Bank of America Savings Account Interest Rates: November 2023
Two people discussing finances at a table with a laptop and clipboard
Why Choose a Money Market Account Instead of a Savings Account?
Couple Doing Banking
Negotiable Order of Withdrawal Account: Overview, History
Putting a coin in a white piggy bank at home savings account concept
Wells Fargo Savings Account Interest Rates
Two men meeting in an office
Passbook Loan: Meaning, How it Works, Pros and Cons
Young couple reviewing bills
Linked Savings Account: Meaning, Benefits, FAQs
Senior woman using online banking on her phone to look at her savings account
Capital One Savings Account Interest Rates: November 2023
Woman paying bills using her laptop at her kitchen table
USAA Savings Account Interest Rates: November 2023
woman and man sit at kitchen counter working on laptop
Citibank Savings Account Interest Rates: November 2023
Low section of young woman managing online banking with mobile app on smartphone while enjoying the sun on lounge chair by pool side
Fidelity Cash Management Account Interest Rates
A senior couple planning their finance and paying bills while using a laptop at home
Ally Bank Savings Account Interest Rates: November 2023
Shot of young woman managing bank account on smartphone at cafe
TD Bank Savings Account Interest Rates
Woman managing home finances
SoFi Savings Account Interest Rates: November 2023
managing online banking with mobile app on smartphone
Discover Savings Account Interest Rates: November 2023
woman managing online banking with mobile app on smartphone while lying on bed relaxing at cozy home
American Express Savings Account Rates of 2023
Couple holding credit card and using laptop.
Christmas Club: Overview, History, Example
Senior Couple Meeting with Financial Advisor
E*TRADE Savings Account Interest Rates
young woman managing savings bank account on smartphone at cafe
Apple Bank Savings Account Interest Rates: November 2023
Financial management with mobile banking service
Marcus Savings Account Interest Rates: November 2023
A man sits at a desk with a computer, looking at his phone and some documents.
Barclays Savings Account Interest Rates: November 2023
Over the shoulder view of young Asian woman using online banking app on smartphone, checking financial bills
Charles Schwab Savings Account Interest Rates
Relaxed young adult woman with cell phone to check savings account
U.S. Bank Savings Account Interest Rates
Over the shoulder view of young Asian woman checking online banking on smartphone while handling personal banking and finance at home
State Farm Savings Account Interest Rates
managing online banking with mobile app on smartphone
LendingClub Savings Account Interest Rates: November 2023
Savings Account
What Is a Savings Account and How Does It Work?
Joint
a couple looking at their laptop in their living room
Employee Contribution Plan: Meaning, Design, Popularity
What to Know About Thrift Savings Plans
How Does a Thrift Savings Plan (TSP) Work?
Savings Club
What Can Be Paid With HSA Money?
Health Savings Account (HSA) Rules and Limits