an interest bearing deposit account held at a bank/financial initiation.

• typically: pay modest interest rate

• safe/reliable

• great for parking cash available for short term

Limitations on now often you can withdraw

• Ideal For emergency fund

• Short term-goals (baying a car, vacation)

• more surplus cash you don't need in your checking account: get more interest

How do they work

• sources of funds of financial institutions for loans

• interest rates vary

• some require a minimum

• The more competitive the rate the more it will fluctuate

• balance in order to avoid monthly fees.

• Earn highest published rate , others have none (balance requirement)

Advantages

• Places to put your money that is separated from everyday banking needs.

• rainy day / earmark funds to achieve a big saving goal

• Security - Federal Deposit Insurance Corporation (FDIC).

• saving accounts earn money

• impose hefty penalties if you withdraw your funds too early.

• at the same installation as primary (access very liquid: hard to get the cash)

• Checking accounts often has convenience and efficient benefits.

  • transfer between accounts.

  • more than one savings account

Disadvantages

• doesn't save like other saving accounts

• higher news with certificates of deposit/treasury bills

• invest in stock |bonds.

• Liquid: key benefits / downsides

• may tempt you to spend money you have saved

• More difficult to cash in bonds