What Is a Business Savings Account?
In essence, like any savings account, a business savings account is an account you open with a bank in order to store extra capital, and hopefully, grow the funds that you store.
With a business savings account, you’ll receive interest on your account balance, while also being able to make deposits and withdrawals as necessary. Unlike many personal savings accounts, however, a business savings account—in particular, high yield business savings accounts—will likely require you to deposit a certain amount of money to open the account, maintain a particular balance, and place limits on the number of withdrawals and account actions you can make.
Therefore, you’ll probably only want to open a business savings account when you’re confident that your company has enough money in your business checking account to cover monthly expenses and other operational costs throughout the year. You won’t want to open a savings account just to find that you don’t have enough cash to cover your overhead, thus closing the account (or being below a minimum balance required by the bank).
Business Savings Accounts vs. Business Checking Accounts
A business savings account is very different from a business checking account. In fact, these two types of bank accounts should be used in tandem, and as we’ve suggested, there’s a right time to invest in a savings account.
Generally, in the timeline of a small business, a savings account will come after your business checking account is well-established, as many startups don’t have enough capital to keep a portion tied up in savings. However, if your business does have the capital, it never hurts to establish both types of business bank accounts from the get-go.
It’s important to remember the essential differences between these two accounts. Although there are several points you may take into account, on the whole, the distinctions boil down to two features:
– Funds in your savings account will accumulate interest over time, whereas those in your checking account will not.
– You’ll likely have more limited access to the funds in your savings account than those in a checking account.
This being said, you’ll want to think of a business checking account as an essential tool from the moment you start your business—it’s what you’ll use to separate your business and personal finances. You can think of a business savings account, on the other hand, as the next step up in your financial journey once your business has sufficient capital to start investing in its future.