Why everyone should open a savings account
Whatever your financial goals, it’s a good idea to open a savings account. You also won’t need a bunch of cash to open an account with many banks. In some cases, financial institutions will even allow you to open a savings account without depositing anything.
Let’s see how a savings account could be the right fit for your finances.
Who should open a savings account?
When you only use a checking account, your financial tool belt is missing an essential part: a savings account.
With a savings account, you can clearly separate funds from your normal expenses for a number of good reasons. You may want to save for the down payment on your first home, set aside funds for your dream vacation, or build an emergency fund to help you deal with the financial challenges life throws at you.
Without the clear designation of a savings account, it’s too easy for the money in your checking account to become a multipurpose slush fund where you spend more than you expect. But if the funds were safely stored in your savings account, you might think twice before delaying your other financial plans for any impulse purchases, like a nice dinner or an outfit.
When to open a savings account?
The best time to open a savings account is as early as possible.
“Anyone from kids to seniors can open savings accounts, but they’re most effective when they’re started early,” says Jim Pendergast, senior vice president of AltLINE at The Southern Bank.
Starting earlier gives you more time to build up your savings before you need them.
Benefits of a savings account
The importance of opening a savings account cannot be understated. But what are the specific advantages that accompany this choice? Here are the main advantages:
Great place to store emergency funds
An emergency fund is an essential part of a sound financial base. According to Scott Sturgeon, CFP and director of wealth management at Falcon Wealth Advisors, a savings account acts as an insurance policy against any sudden, large or unexpected expense.
“For example, if you lose your job, having six months of spending in your savings account can be the difference between missing a mortgage or rent and living comfortably while you find a new job,” says Sturgeon.
Separate place to save for big expenses
Since you’re saving for a big expense, it can be difficult to stay motivated. It’s too easy to want to spend the “leftover” money in your checking account. This is where a savings account can help.
“A savings account allows you to save for the big purchases you want to buy by keeping those funds in a vacuum where it’s more difficult for you to spend them,” says Sturgeon.
Since federal regulations typically only allow six withdrawals per month, you’ll have fewer opportunities to derail your savings goals.
Options to automate your savings
Not only is a savings account a separate place to store your money, it also allows you to add funds automatically. With many savings accounts, you can even set up an automatic transfer of a portion of your regular paycheck.
“When you add money to your account by direct deposit, you can contact your financial institution to put some of that money in a savings account,” Pendergast explains.
According to him, the beauty of this option is that “you will not miss the money which goes in your savings account, and you will have set up an automatic savings system”.
A safe way to store savings
FDIC insurance protects up to $ 250,000 in your savings account with federally insured banks. So even if you don’t get the best returns available, you will still benefit from the security offered by insured funds.
How much money do you need to open a savings account?
The good news is, you won’t need a lot of money to open a savings account. Many financial institutions will allow you to open a bank account without requiring a deposit.
For example, you can open a savings account with Citibank and Marcus by Goldman Sachs without a minimum deposit. However, read the fine print. Some banks will charge you a fee unless you deposit a certain amount of money into the account within a specified time.
Some banks will also require a higher deposit when opening the account. In general, a minimum deposit can be between $ 25 and $ 100. But again, you can find banks without requiring you to deposit any money.
How to open a savings account
Ready to open a savings account? Here’s how to do it.
Start by comparing your options on Bankrate. Once you have selected the bank account, it is time to put your documents together. You will need the following information to open a savings account:
- Social Security number
- Date of Birth
- Identification, such as your driver’s license
- Contact information
- bank account information
After filling out the application with the information from these documents, you will need to wait for the bank to review your application. It shouldn’t take too long for your new account to be up and running, maybe just a few minutes.
Should I open a savings account online or in person?
You will find that most banks allow you to open your savings account online. You will likely come across banks that operate exclusively on the Internet.
Choosing to open a savings account online rather than in person will depend on your personal preferences. You can totally open a savings account without leaving the comfort of your own home. If you are able to go for an online option, you may be able to take advantage of better terms, such as a higher interest rate.
But if you prefer the personalized touch of an in-person banking experience, a physical app is your best bet.
What type of savings account is right for me?
Confused About Which Type Of Savings Account Is Best? The answer will come down to what you want to withdraw from a savings account.
If you are looking for the best absolute interest rate, you can go for an online-only savings account. They tend to pay higher rates.
If you want to be able to talk to a local banker about any issues with your savings account, a traditional bank with branches might be better suited.
If you want immediate access to your savings in an emergency, you can open a savings account in which you already have a checking account.
As you explore your options, take advantage of Bankrate’s savings account analysis to help you find the one that’s right for you.