Do Savings Accounts Really Work?

Don't even think about it!

Don't even think about it!

So, you’re unsure about opening that savings account everyone is always nagging you about.

“There’s no point, interest rates are way low right now,” says that guy who just dropped two grand on VIP passes to Coachella. “Besides, the smartest way to tie up your money right now is in crypto,” says your friend who really needs the price of BitCoin to start going up again.

Okay, we get that you’re skeptical, and it’s only normal after all. It’s your hard-earned cash we’re talking about here. So we did some research and compared a few different approaches to try and figure out if savings accounts really do work.

But first things first: If you want to measure the effectiveness of something, you have to know what it is!

What is a Savings Account?

Savings accounts are issued and held by financial institutions like banks and credit unions. As their name suggests, they are widely considered a safe place to keep savings. But unlike checking accounts, savings accounts rarely offer debit cards or checks, and limit customers’ number of withdrawals per month to six.

Who Are They For?

Since most people need to access their cash more than six times a month, savings accounts are great for money not needed right away—like emergency funds and long-term savings.

So, why do people open savings accounts instead of just leaving all their cash in checking?

Advantages of a Savings Account

In a word: interest. Savings accounts can earn customers’ additional money (called interest) on their savings. How much interest is earned is determined by the amount of money in the account, and how long it’s left there.

Safety is another advantage. With FDIC-member banks and credit unions, the federal government insures your money up to $250,000 for each account you have—so you should always bank with an FDIC-insured financial institution. That means that if there’s a fire, flood or some other catastrophe, or if there’s a run on the bank, your money stays safe.


Some Benchmarks for Comparison

  • Access to your Money: How easy or difficult is it to access your cash?

  • Potential interest-earnings: Can your saved cash make you even more money?

  • Your money’s safety: How safe/trustworthy is the place you keep your cash?

Great—so we’ve covered exactly what a savings account is, and we have our benchmarks, as well as a few important questions to ask. Now let’s compare savings accounts to other saving methods by rating them according to these benchmarks. To keep things simple, we’ll use a rating system of High, Medium and Low.


The Savings Account Method

Access: Medium

Savings accounts provide limited but relatively frequent access (six times per month).

Interest: High

Savings accounts are interest-earning so the potential of earning interest is real. To sweeten the deal, the more money you save, and the longer you save it, the more interest you stand to earn.

Safety: High

If you open an account with an FDIC-member bank or credit union, your money is insured by the Federal Deposit Insurance Corporation up to $250,000, no matter what.


The Cookie Jar/Under-the-mattress Method

Forking over your cash to a financial institution makes you a bit wary, so instead you keep it close—like really close. The downside is you’ve taken on all of the risk of keeping your money safe, and have little recourse in the event of theft or loss. Plus, that money isn’t exactly working hard for you.

Access: High

You have ready access to your cash, which can be both a good and bad thing, depending on how good you are at fighting the temptation to dip into your stash.

Interest: Low

Actually, to be more accurate, interest is non-existent. Neither the mattress nor the cookie jar can generate interest (though we can think of someone who wishes it were otherwise).

Safety: Low

It may surprise you, but your home isn’t a safe place for your savings. Things like fire, flooding and crime all put your money at risk. Plus, a lack of records or statements makes replacement or reimbursement of your money nearly impossible.


The Checking Account Method

You already have a checking account, and you keep a little extra in your account for a rainy day. Why get a savings account? Well, it all comes down to interest. There’s a good chance you’re missing out on interest-earnings, since savings accounts generally offer higher rates than checking accounts. In fact, most checking accounts don’t offer interest at all.

Access: Medium to High

You’ve chosen to keep your money huddled together in one account, which means only budgeting and self-control are keeping you from dipping into your funds.  

Interest: Low

You might be earning interest, but you would probably be earning more interest with a dedicated savings account. Maintaining your spending and savings cash together might seem like a good idea, but constant fluctuations in your account balance may cause you to lose out on potential interest earnings.  

Safety: Medium

You’ve essentially put all your eggs in one checking account basket. This is generally okay if your cash is held at an FDIC-member bank or credit union, but it can still lead to some annoying inconveniences. Loss or fraud may cause you to temporarily lose access to your cash or rainy day funds, while you wait for your bank to unfreeze the account and send you a new card. Let’s just hope nothing happens that requires emergency money while you wait.


The Trusted Loved One Method

Your honest enough with yourself to know that ready access to your dough is just not for you. So, you hand a bit of your cash over to someone you know and trust. They want what’s best for you, and they won’t let you blow $200 on an impulse buy Instant Pot. That’s some seriously great Adulting on your part, but it’s an awful lot of responsibility, trust and pressure on your loved one.  

Access: Medium

By design, you’ve chosen a spouse, parent or other loved one to safeguard your cash. But in reality, you’ve just outsourced the cookie jar. (See above.)

Interest: Low

Zilch, nothing. Like the underside of your mattress, your loved one can’t generate any interest.  

Safety: Low

It may feel safe to keep your cash with the ones you love but your designated loved one (and by extension you) have little recourse in the event of loss or theft.



Yes, savings accounts work! In fact, not only do they work—they work really well. Everyone’s been right the whole time. Savings accounts are an effective, safe place to store your cash, and they typically allow you to earn some interest in doing so. They work even better with a dedicated savings budget.

And if you’re ready to pull the trigger on getting started saving and need some help finding the right bank for you, well, we’ve got you covered. Download Lifesaver today to view your best matches.