How does a savings account work?

A savings account is a useful tool for managing your money, helping you save for goals and earn a little bit of extra money through interest. Here's a breakdown of how it works:

• Deposits: You deposit funds into your savings account, this is your principal, the starting amount that will grow over time.
• Interest: Savings accounts earn interest on the money you deposit. The interest rate is typically a small percentage, but it allows your money to grow gradually over time. Interest is usually compounded, meaning the interest you earn also earns interest in future periods.
• Withdrawals: Unlike a checking account, there may be limitations on how many withdrawals you can make from your savings account each month. This is to encourage saving and discourage using it for everyday spending. However, you can usually access your money easily through an ATM, online banking, or by writing a check (depending on the bank).
• Safety: Savings accounts at FDIC-insured banks are insured for up to $250,000 per depositor, per insured bank, for each ownership category. This means that even if the bank fails, your money is safe up to that amount.

Overall, a savings account is a good option for saving money for short-term or long-term goals, where you might need to access the money occasionally. They offer a safe place to store your cash, some growth through interest, and reasonable access to your funds.