What is a savings account?

A savings account is primarily defined as a bank account established to save money while earning interest on the deposited funds. This means that when you place money into a savings account, the bank pays you interest as a reward for keeping your money with them, which can help your savings grow over time. Savings accounts are typically offered by banks and credit unions, allowing for a secure place to keep funds separate from daily spending.

The account is designed to encourage saving rather than frequent transactions. While it can be accessed for withdrawals or deposits, the primary purpose is to save money. This distinguishes it from checking accounts, which are intended for everyday transactions. Unlike the other options, a savings account is not classified as a non-interest-bearing account, nor is it an investment account, which would involve different risks and returns. This makes the chosen option the most accurate understanding of a savings account.