Finance
How do savings accounts work?
A savings account works by holding your money safely at a bank while paying you interest on the balance. The bank uses your deposits to lend to others, and in return pays you a small percentage, helping your money grow gradually over time.
See it in motion.
Watch a 2-minute animated lesson that shows exactly how a savings account works.
Step by step
- 1It keeps your money safe and accessible at a bank.
- 2The bank pays you interest on your balance.
- 3Interest compounds, so savings grow over time.
- 4Deposits are often protected up to a legal limit.
Frequently asked questions
- How do savings accounts work?
- You deposit money, the bank pays you interest on it, and your balance grows over time.
- Why do banks pay interest on savings?
- They lend out your deposits to others and share part of the earnings with you as interest.
- What's the difference between a savings and checking account?
- Savings accounts earn more interest but are for storing money; checking accounts are for everyday spending.