What is a traditional savings account? A teen’s guide to the basics

You have a little money and some big goals, and you're ready to start saving — but it seems like everything out there is written for adults. Well, lock in, because this teen savings guide is just for you.

We'll focus on what a traditional savings account does and why it's helpful for teens just starting to save. You'll get step-by-step guidance on how to open a savings account and get money management tips specifically for teen savers. 

What is a traditional savings account?

There are many kinds of bank accounts, from checking accounts to the college savings accounts parents set up for their kids.

A savings account is money in the bank — literally. You deposit money into the account, and the bank holds on to it for you. Meanwhile, the bank might borrow some of that money to lend to other customers, but don't worry. Banks have special insurance that guarantees you'll get it back, plus interest.

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Interest is money the bank pays you in exchange for trusting them with your money. In 2025, a traditional savings account has a typical interest rate of around 0.40% — a little under a half cent per dollar. 

Different banks have different interest rates, so it's important to shop around. Hot tip: Don't sleep on Greenlight.^ You can earn up to 6% on savings*, depending on your family's plan.

Here’s how it works: The money you earn is subject to compound growth, meaning it earns on itself. If you earn 6% per year on $100 in your Greenlight savings, you'll have an extra $6 after 12 months. That $6 becomes part of your account, and now you're earning 6% on $106.

Now, let's say you keep depositing $5 per month and earning 6%. Those small deposits add up, and in 10 years, you'd have $938, assuming you don't take anything out. You can use an online savings calculator for a more visual way to see how compound interest works.

How to open a savings account as a teen

Learning how to open a savings account is mostly about choosing the right bank. The best teen banking options have low fees, flexible control options, and an app you can use to manage your savings on your phone. 

Some banks ask you to come in person to open a bank account, but there are also plenty of online-only options. Either way, you'll need a parent or guardian if you're under 18. It's the law — minors aren't allowed to sign legally binding contracts, and bank agreements count.

You'll also need:

• Your social security number

• Official ID, like a passport or state learner’s permit

• Proof of your address

• Employment information, if you have a job

The rest of the process is usually pretty easy. Apply, get approved, make a deposit, and go. 

The pros and cons of traditional savings accounts

There are plenty of benefits of a savings account for teen money management. It encourages you to start saving early, which gives your money more time to grow. It also helps you learn how to save money by rewarding you with interest — the more you have in the account, the more you earn.

Be careful, though, because some savings accounts have limitations. For example, some banks have a minimum balance on their savings account. A minimum balance is how much you need to have in a bank account to avoid fees. There's no typical minimum balance on a traditional savings account, so you'll need to read the terms and conditions carefully.

Tips to save more effectively

As a teen saver, you're luckier than adult beginners. You have plenty of time to learn all the hacks to increase savings. Plus, the sooner you get started, the more your savings can grow.

Pro tip: Copy and paste these saving tips for teens into a Google Doc or the notes app on your phone:

• Set savings goals: Be specific. If you want a car for college, figure out how much you're willing to pay. Write that number down and think of it every time you choose to save versus spend.

• Track progress: Add a Savings Goal to your Greenlight app and watch as you get closer. Use those numbers to decide whether you want to keep saving the same amount or look for ways to earn and save more.

• Look for ways to save money: Any time you're tempted to spend something you didn't plan for, think about your savings goal. Put exactly the amount you didn't spend into savings, then give yourself a free little treat! 

If you need to save money fast, try Greenlight's parent-paid interest. Your parent or guardian can pay you interest on your savings, up to 100%, directly through the app on the first of the month.

Where Greenlight fits in

Now that you know how savings accounts work, you're ready to choose your first. Greenlight is here as an expert on personal finance for teens, with special tips and tools designed just for you.

At Greenlight, we believe real-life experience is the best teacher of financial literacy for teens. Get your own debit card and app to manage your cash, save for your goals, and learn to invest. Your parents can even send you money and set spending limits with you, so you stay on track to grow your money.

Your app. Your money. Manage money, save up, and stay safe with our all-in-one app. Show your parents how Greenlight can help. Try Greenlight, one month, risk-free.†

^Greenlight is a financial technology company, not a bank. The Greenlight app facilitates banking services through Community Federal Savings Bank (CFSB), Member FDIC.

*Greenlight Core families can earn 2% per annum, Greenlight Max families can earn 3% per annum, Greenlight Infinity families can earn 5% per annum, and Greenlight Family Shield families can earn 6% per annum on an average daily savings balance of up to $5,000 per family. To qualify, the Primary Account must be in Good Standing and have a verified ACH funding account. See Greenlight Terms of Service for details. Subject to change at any time.