Savings account

What it means

A savings account is a bank account for setting money aside at a higher interest rate than a current account. It has no payment functions, or only limited ones, and money usually moves only to a linked current account. The rate can change at the bank's discretion and with market rates.

Unlike a term deposit, the money is not locked in for a fixed period, so it can be accessed quickly, although some banks limit the number of withdrawals or cut the rate on early withdrawal. It is therefore a compromise between return and availability.

Banks offer savings accounts to both individuals and companies, and balances are covered by deposit protection up to the statutory limit per depositor per bank. With larger amounts, companies therefore sometimes spread their reserves across several banks.

How it works in practice

Companies use a savings account mainly for reserves they do not want to mix with operating cash. Typically this is money for income tax, VAT or social contributions due later under the tax calendar, and a separate account removes the risk of spending it on day-to-day operations.

When planning cash flow, it helps to set up a regular transfer of a fixed percentage of every incoming payment to the savings account. The company gradually builds a buffer for unexpected costs and improves its liquidity without tying the money up for long.

In the accounts, the savings balance is shown as short-term financial assets and credited interest is financial income. When comparing offers, one should look not only at the interest rate but also at fees, withdrawal conditions and whether the rate applies to the whole balance or only up to a certain amount.

What to watch out for

Interest on a savings account is taxable, and the method of taxation depends on whether the holder is an individual or a legal entity. At year-end closing a company should check that interest is booked correctly and that any tax withheld matches the bank statements.

A promotional rate is often time-limited or conditional, for example on new deposits or active use of a current account. Once the promotion ends, the rate may drop noticeably, so it is worth reviewing the terms regularly and switching to a better offer when needed.