First of all, it holds your money safe. The account is FDIC protected in most American banks. NCUA for Credit Unions.

The interest the bank pays is your cut of the interest they charge when they lend out your money.

Back when I was a kid, my savings account paid 5%. I have some accounts that pay over 1% today.

Lets say on October 1, you put 1000 dollars in a savings account paying 1%.

• on October 31, your 1000 earned 83 cents.
• on November 30, your 1000.83 earned another .83
• on December 31, your 1001.66 earned another .83
• on January 31, your 1002.49 earned 84 cents

In other words, the interest compounds.

obviously it compounds faster if you can ear higher rates of interest.

A lot of people talk about HYSA -- High Yield Savings accounts.

I have a high yield checking account -- the account earns 3%, but only on the first 10k in the account, and only if I meet some other provisions.

bankrate.com lists several companies paying over 2.5% in interest for deposits there.