What is a defining feature of a savings account?

A defining feature of a savings account is that it typically earns interest. This characteristic distinguishes savings accounts from checking accounts, which are primarily used for day-to-day transactions and may not offer interest at all. The interest earned on a savings account allows individuals to grow their funds over time, making it an effective tool for saving toward goals, whether short-term or long-term.

Savings accounts are designed to encourage saving behavior by rewarding account holders with interest on their deposits. This interest can compound, meaning that not only does the initial deposit earn interest, but the interest itself can also earn interest over time, enhancing the overall savings.

In contrast, high fees are generally not a typical feature of savings accounts, and the best savings accounts often have low or no maintenance fees. Additionally, savings accounts usually do not require a long-term commitment; they provide flexibility for individuals to deposit and withdraw funds as needed. Lastly, most savings accounts are insured by the government through agencies like the FDIC in the United States, providing a layer of protection for depositors.