Savings Account
Candlefocus EditorSavings accounts usually offer relatively high interest rates, as compared to checking accounts, together with more features such as ATM withdrawals, access to CDs and money market funds, and more competitive rates on other banking products. As such, savings accounts are generally utilized by individuals who want to make their money work for them over an extended period of time by earning interest on their deposits.
Accessibility may be one of the most important features of a savings account. Since these accounts usually offer higher interest rates than checking accounts, most financial institutions limit the number of withdrawals that can be made from a savings account in a given month. In some cases, people are also limited to six preauthorized transfers or withdrawals from savings accounts per month. This feature keeps your money from sitting in a checking account, where it can be quickly and easily used.
The interest you earn on a savings account is considered taxable income and can be reported on your tax return. While reporting income from savings accounts is required, there are several ways to reduce your tax burden. Some accounts offer higher interest rates for higher balances, and many offer tax-free withdrawal options for qualified individuals.
In conclusion, savings accounts are an effective way to store and grow your money without taking on too much risk. They usually offer relatively high interest rates, while also allowing easy and secure access to your funds. The interest earned on a savings account is also tax-reportable, so be sure to keep track of all the deposits and withdrawals to avoid paying more than you should in taxes.