What is a savings account?

A savings account is fundamentally a deposit account held at a financial institution, such as a bank or credit union, designed for consumers to save money while earning interest. This type of account typically offers a modest interest rate, which allows the depositor to earn some return on their savings over time. The primary purpose of a savings account is to provide a safe place for individuals to store their funds while also growing their savings at a slower, yet steady rate compared to riskier investment options.

In contrast, other options address different financial products or concepts. An investment account is designed for assets with higher returns but also involves greater risk, which doesn't align with the characteristics of a traditional savings account. A checking account is primarily for everyday transactions, allowing for frequent withdrawals and deposits, but usually offers little to no interest. Lastly, an account that earns no interest does not fulfill the basic definition or purpose of a savings account, which is to generate some return on deposits. Thus, identifying a savings account as a modest-interest deposit account accurately captures its key features.