3 Ways a Savings Account Might Cost You Money

If you got your first bank account as a kid, it was likely to have been a savings account. A basic savings account is a great way to teach kids about money -- the earlier they learn that money can be saved for the future and will earn interest in the process, the more likely it is that they'll take the lesson to heart.

As adults, savings accounts are still a cornerstone of personal finances -- having a safe place for your saved cash is crucial. And savings accounts are often the best place for your emergency fund, too. Unfortunately, savings accounts are not entirely without risk. Here are a few ways you could lose money in one -- as well as the steps to take to keep this from happening to you.

1. Bank failure

The banking industry had a couple of big shake-ups in 2023, in the form of multiple bank failures. The collapse of Silicon Valley Bank in March was the biggest bank failure since 2008, and it was soon followed by the failure of First Republic Bank. Naturally, this led to a lot of worry about whether banks were a safe place to keep your cash -- or if it was a better idea to withdraw your life's savings and stick it under your mattress (no, not a good idea).

Thankfully, there was no financial loss to customers of these banks, thanks to the Federal Deposit Insurance Corporation, or FDIC. Many American banks are insured by the FDIC, which means your money is safe in the event of a bank failure -- up to $250,000 of it (or $500,000 if you co-own your account with someone else).

If you're worried whether your bank is insured, it's easy to check. Chances are, it'll have the FDIC logo featured prominently on its website, or failing that, pop its name into the FDIC's BankFind Suite tool to check. This way to lose money in a savings account only applies to you if your bank isn't insured -- and if it's not, find a new bank ASAP.

2. Maintenance fees

The second way you can lose money in your savings account is via maintenance fees. That's right, some banks charge you for the privilege of keeping your cash in an account.

I lost $50 to savings account fees in 2022, and I'm still a little bitter about it. But I did some digging to find that I could avoid the fee if I kept my account balance above a certain level, and I've been doing that ever since. Many banks offer ways to waive a fee, including maintaining a minimum balance, receiving a certain number of deposits every month, or falling into a special group (such as being a student or a senior).

I also encourage everyone to choose a bank that doesn't charge fees, regardless of your balance -- the online-only bank I joined in 2022 is fee free, and I've been so happy with my account there. (Incidentally, you're more likely to find free accounts offered by online banks, as they don't have the overhead costs to maintain physical branches, like brick-and-mortar banks do.)

3. A low APY

Finally, beware of low APYs (annual percentage yields -- the amount of interest you'd earn in a year) on savings accounts. According to the Consumer Price Index, the most recent data showed an inflation rate of 3.4% between December 2022 and December 2023. In plain terms, if you've got a savings account paying a lower APY than 3.4%, your money is actively being eaten away by inflation.

What's worse, according to savings research from The Ascent, just 31% of us have a savings account paying at least 4% APY. The average APY on a savings account is just 0.47%, according to data from the FDIC -- but some big banks pay much less than this. My big bank savings account gives me just 0.01%, which is why I only keep the account minimally funded to avoid that monthly fee.

Luckily, losing saved cash to inflation is easily avoided. Take a gander at The Ascent's list of the best high-yield savings accounts, and you'll find accounts paying as much as 5.32% as of this writing. Opening a high-yield savings account can help you beat inflation and grow your money -- a fantastic thing in an uncertain world.

By and large, savings accounts are pretty great. Just be sure to check that your bank is covered by FDIC insurance, and if you don't already have one, seek out a high-yield savings account with a solid APY and no fees. You'll most likely find the best one for you offered by an online bank.