4 myths about savings accounts — and the reality behind them

A savings account plays an essential role in protecting your financial health. It allows you to keep your money safe and grow it with compound interest as you're working toward your goals, such as establishing an emergency fund, affording home renovations, and more.

To take full advantage of what savings accounts have to offer, it helps to understand how they work — and how they don't work. The team at CNBC Select has encountered plenty of myths about savings accounts, and we're taking on four of the more common ones while also offering advice on how to get the most out of this key financial product.

You might hesitate to use a savings account because you believe that once your money goes into the account, it's nearly impossible to access it.

Most of the time, that's not the case.

Savings accounts are designed to keep your funds liquid, meaning you can access your money anytime. This is what makes savings accounts — and high-yield savings accounts especially — such a good choice for keeping your emergency fund. Even as your money grows, you can still withdraw from the account as needed.

That said, it's true that many banks may limit transfers to six per month before imposing fees. However, ATM withdrawals, as well as transfers and withdrawals requested in person or over the phone, are usually not subject to the limit. You can check with your financial institution to make sure you're not hit with any extra charges.

If you haven't bothered contributing to your savings account for a long time because of the lackluster annual percentage yield (APY) it earned when you opened it years ago, you may want to take another look.

Interest rates on savings accounts fluctuate depending on the movement of the federal funds rate. When the Federal Reserve lowers rates to boost the economy, savings interest rates typically decrease. On the other hand, when the Fed raises rates, you can see your earnings increase.

For instance, as of writing, the Western Alliance Bank High-Yield Savings Account earns an APY of 3.80%, and Newtek Bank Personal High Yield Savings offers a 4.35% APY. But if you're interested in earning such high returns, it's best to prioritize signing up soon as these rates are likely to start going down as the Fed lowers its benchmark rate.

Again, CDs are an exception here. After you put your money in a CD, the rate will stay the same until it matures.

You may be discouraged from parking your money in a savings account because the potential returns simply don't seem enough to be worth it. This may be especially true if you're looking at savings accounts at big banks which sometimes have very uninspiring rates — think APYs of around 0.4%.

Fortunately, you can earn much more with a high-yield savings account. Currently, you can easily find accounts that earn around 4% — and some even up to 5.00% or more.

Additionally, it all depends on how much you contribute to your savings. Say you put $1,000 in the LendingClub LevelUp Savings account which compounds interest daily at the current interest rate of 4.00% APY when you make monthly deposits of at least $250 (without deposits a 3.00% Standard APY applies).

Of course, you might not be able to contribute so much from the get-go, but if you contribute to your savings account consistently and avoid withdrawing the money, you're more likely to see significant earnings.

After the news of regional bank collapses, you may feel that the safest place to keep your cash is under your mattress. Yet the money in your bank account is generally safe — so long as it's federally insured.

Deposit bank accounts (including savings accounts) at banks are insured by the Federal Deposit Insurance Corporation (FDIC) for $250,000 per person, per bank and per account category. And if you have a savings account at a credit union, you'll get the same level of coverage through the National Credit Union Administration (NCUA).

If you have more than $250,000 in savings, it may be wise to open multiple savings accounts to ensure all of your funds are protected.

Myths and half-truths about savings accounts may have led you to avoid the product altogether. However, savings accounts offer a safe way to gradually grow your money while still having access to it when needed. Just make sure you pick an account that matches your needs, paying attention to interest rates, fees and other terms and checking that the financial institution is federally insured.

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