Learn of the different types of savings account including child, health, high yield, regular, retirement, and more.
The Different Types of Savings Account
The various savings accounts that banks offer to their customers are as follows:
- Child savings account
- Health savings account
- High yield savings accounts
- Joint savings account
- Regular savings accounts
- Retirement savings
- Student savings account
What is a Savings Account?
It is a deposit account maintained at banks or other financial institutions that offer basic monetary security and a fixed interest rate. It is the simplest type of bank account that is available to the customers.
Objective of bank savings
The main objective of a saving account is to promote the culture of saving money in people. When a person is earning more than he can spend then he wants to store the money in a secure place. Banks are great place to deposit savings; they also give a modest interest in return of the money deposited with them.
How does it work?
The main idea behind savings account is to use the idle money of the general public and give benefits to them in the form of interests. When a person puts his excess money with the bank, the bank invests the money in the market or lends it to others in the form of loans. When the bank earns profit from its investments or charges interest to its debtors then it shares a portion of its profits with the saving account holder in the form of interest. The rate of interest set by the bank is fixed and it is not determined by the amount of profit made by the bank. If the bank makes a large amount of profit then too it pays the account holder the amount of money as interest as previously decided.
More on the different types of savings accounts
The cash that is stored in a savings account is less liquid than checking account. However, it is more liquid when compared to Certificate of Deposit (CD). As compared to CD, the rate of interest is lower in saving account as the money is more liquid. The uncertainty of withdrawing money at anytime makes it difficult for banks to provide the same rate of interest as in fixed deposits.