Understand the benefits and features of a savings account and what you need to open a savings account.
Takeaway Points
- Opening a savings account is an excellent first step towards better financial health
- With the right savings account, you can easily separate your funds from your spending account
- A high-yield savings account helps your money grow faster
- Some savings accounts tend to have minimum account balance requirements
- Funds in a credit union savings account are protected and earn dividends
- Online savings accounts often offer higher interest rates than conventional brick-and-mortar accounts
Opening a Savings Account
Do you have a savings goal? If so, taking small steps to build or grow your savings now will help you prepare for a better future. If you want to start an emergency fund, or save for a vacation, opening a savings account at a local bank or credit union can be a helpful tool.
A savings account is a standard account at a bank, credit union, or other financial institution that allows you to deposit, secure, or withdraw funds when the need arises. Usually, a savings account pays some interest on deposits. However, the interest rate is low.
Some savings accounts limit access to your funds and have a fixed rate for a specified period of time. And these fixed savings accounts usually have better interest rates compared to easy-access savings accounts.
Step-by-Step Guide to Opening a Savings Account
The process of opening a savings account doesn’t take more than one hour. And often it just takes a couple of minutes. Here are the steps to follow to open a savings account.
Compare Different Banks
Compare different banks and credit unions by checking rates, fees, and minimum balance requirements.
Choose How to Apply
Depending on the financial institution, you may apply by phone, online, or in person. You can even mail an application.
Check Eligibility
If you prefer a credit union, you should also check for eligibility. You can find the relevant information online or speak to a credit union customer agent.
Gather all Documents
You should gather all the data and documents that will be needed by the bank, including your Social Security number, birth certificate, driver’s license, or military identification.
Select a Single or Joint Bank Account
Let the bank know if you will open the account yourself or with somebody else, such as your spouse. You will likely need the information from the previous steps for anybody else whose name will be on the joint account.
Submit Your Application
While you receive an acknowledgment within a few minutes when you apply online, it may take between three and five business days for the bank or credit union to verify your information, open the bank account and provide access.
Open and Fund Your Account
The final step is to fund your account. You can do it immediately or at a later time.
Can an Account be Opened Online?
You can open an account online. Opening a savings account online may be more straightforward and less hassling than traveling to a bank branch.
How to Set Up Online Banking
You will be happy to know that almost every bank and credit union provides some type of online banking to meet your needs. This can make it simple to check your balance, manage your account, and transfer funds.
You can sign up for an online bank account and download the bank’s mobile application and benefit from on-the-go access.
What Bank Account Features are Important to You?
When opening a savings account and understanding how it works, you may choose the specific features that fit your needs and requirements, including:
Digital Access
Most banks and financial institutions offer online and mobile banking. Look for options like mobile check deposits, free money transfers, or a simple-to-use mobile app.
Liquidity
You should look for savings accounts that allow transfers and withdrawals through multiple channels, including in-person and at an ATM with your debit card. Also, beware of daily withdrawal limits.
How to Choose the Best Savings Account?
Keep in mind that the best savings accounts earn high-interest rates and charge few fees, helping your balance grow faster. On average, savings accounts earn just 0.3% APY, but many high-yield savings accounts earn considerably more.
This is why it pays to shop around. You can look beyond large financial institutions with thousands of bank branches. Online banks usually offer high APYs with minimal charges and fees.
Interest Rates
Choosing the best savings account for your needs starts with comparing interest rates. You can easily look up and compare rates of interest in visiting the websites of multiple banks or credit unions. Different rates are available for different savings accounts. Choosing accounts with higher interest rates based on your needs will help grow your financial resources.
Minimum Balance Requirements
Consider the minimum balance requirements. You should know that many savings accounts have these minimum balance requirements. These are daily assessments of the minimum amount of money you need to have in your account.
Fees
Keep in mind that some banks and credit unions charge a monthly maintenance fee unless you meet specific requirements. Generally, you can have the charges waived by executing a minimum number of financial transactions per statement cycle or keeping your balance above a certain threshold.
Reason for Saving
You should also consider your reason for saving. For example, if you would like to build an emergency fund that can be accessed instantly, opening a bank account with the financial institution that you have a checking account with makes plenty of sense.
On the other hand, if you are saving money for a goal — like buying a car or making a down payment on a new home, but don’t need quick access to the funds, you should shop around for the best interest rates, which you can find at an online bank.
Final Thoughts
Savings accounts provide one of the simplest and safest ways to earn interest on the funds you have. These accounts offer higher interest rates than regular checking accounts and still make it simple to spend and withdraw money.
