What are Instant Access Savings Accounts?

B. Miller

Instant access savings accounts, also known as regular savings accounts or passbook savings accounts, are a type of savings account that may be withdrawn from as needed, without penalties. This is as compared to a Money Market account, which may only allow a certain number of withdrawals, or a certificate of deposit in which a penalty is incurred if the money is accessed before the certificate has matured, typically from a few months to a few years. Instant access savings accounts are generally a good choice for people of all ages in which "emergency funds" can be stored, or money for something that will be needed relatively shortly, such as for an upcoming vacation.

With an instant access savings account, money can be immediately withdrawn without penalty.
With an instant access savings account, money can be immediately withdrawn without penalty.

The requirements to open instant access savings accounts may vary at different banks. Some banks will require a minimum deposit and a continuous minimum balance, while others will not require a minimum balance. Children who want to open savings accounts will generally need to have at least one parent on the account with them. Upon opening instant access savings accounts, account holders will be given a passbook with the account number and a register in which to record deposits and withdrawals; the bank will then usually send monthly statements detailing the activity on the account, which should be reconciled with the register.

Some banks will offer a type of debit card with instant access savings accounts, to make it even easier to access the funds. In other cases it will be necessary to visit the bank to withdraw money. Transfers between checking and savings accounts may also usually be performed through online banking services, which can be even more convenient for some people who do their banking at larger, national institutions. One is usually free to make a number of withdrawals per month from a savings account like this without getting any account penalties.

The downside to instant access savings accounts is that the interest rates are generally much lower than on other types, such as money markets or CDs. These accounts work well for storing emergency funds, but should typically not be viewed as an investment. Retirement accounts are another option for saving money for later in life, though these carry severe tax penalties if they are accessed too soon, so it is important not to view a retirement account as a type of emergency fund. Experts generally recommend saving between three and six months of living expenses in a savings account for emergencies.

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