Opening a savings account is an important step on the road to a healthy financial life.
Almost all banks and credit unions in the United States offer a savings account. These accounts are not only a great way to protect your money, but they also help you grow your savings with the interest they pay.
If you want to open a savings account, save for a specific goal, or want to save money for a rainy day, this step-by-step guide will get you started.
How to open a savings account (step by step)
Banks and credit unions do their best to make it easier to open a savings account. Here are the steps that you generally need to follow.
1. Compare your options
Many financial institutions offer savings accounts. Before opening your account, make sure you have chosen the right bank for your needs. Look for some of these key features when making your choice:
- Competitive interest rate
- Low or no minimum required balance
- Low or no monthly fees
- If there is a monthly fee, is it easy to avoid?
If you already have a checking account, it is often easy to open a savings account at the same bank. Still, it’s worth comparing other options to make sure your bank is offering a reasonable offer on competitive terms.
2. Gather the required documents
When you open a bank account, you will need to provide information about yourself, as well as some documents. Make sure you have the following information handy when you open the account in person or online:
- Identification, such as a driver’s license or passport
- Social Security number
- Date of Birth
- Address (and proof of address, if your ID shows a previous address)
- Contact information
- Bank account information to fund your new account, if applicable
If you have implemented a credit freeze so that no one can fraudulently open accounts in your name, you may need to lift this credit freeze before opening a new bank account in addition to gathering the above documents. .
3. Choose a joint or individual account
If you are opening an account for yourself, open an individual account. If you are opening a savings account with someone else, such as your spouse or child, you should open a joint account.
Joint accounts offer a few advantages:
The joint holder must bring the same documents when opening the account.
4. Fund your account
When opening a savings account, you will need to make an initial deposit. If you open the account in person, you can usually do so in cash or by check. The catch is that some banks have a minimum opening deposit requirement. Typically, the minimum deposit is between $ 25 and $ 100.
In addition to the minimum opening deposit, some savings accounts charge a monthly maintenance fee that can eat into your savings. To avoid these charges, many banks require the account holder to have a minimum balance of a few hundred dollars.
When opening an account, make sure you deposit enough to meet the minimum opening deposit and keep an account balance large enough to avoid maintenance fees.
5. Submit your application
Submit your application with all the required information and wait for the bank to open your account. This usually happens quickly, and you can start making additional deposits and withdrawals within a day or two.
6. Configure online banking
Almost all banks and credit unions today offer some form of online banking. It’s super easy to check your balance, transfer money, and manage your account. Open an online bank account and download the bank app to your phone for on-the-go access.
Can I open a savings account online?
Most banks and credit unions let their customers do their banking online, which includes opening a new account on the Internet.
Some banks only work online and do not have a physical location. This means that you can open a savings account without ever leaving your home.
Many online-only banks have the best savings account deals, with low minimum balances, low or no maintenance fees, and high interest rates. Some of the best online banks, like Ally Bank and Axos Bank, pay competitive rates and charge no maintenance fees.
If you’re tech-savvy and don’t mind doing all of your banking from a phone or computer, online savings accounts are a great choice. People who are more comfortable doing their banking transactions in person might be better off with a traditional bank.
How to choose the best savings account
Choosing the best savings account is important because the right account can help you get the most out of your savings.
One of the main things to look for is the interest rate. The higher the rate, the faster your savings will increase. Consider this example:
You have $ 10,000 to save and open a savings account with a bank that pays 0.10% APY. Over the course of a year, you will earn $ 10 in interest. If you choose an account that offers 0.50% APY, you will earn $ 50 instead, which is $ 40 more per year.
Another important consideration is the monthly fee. Some banks charge a monthly maintenance fee, unless you meet certain conditions. Typically, requirements involve completing a minimum number of transactions or maintaining a balance above a threshold.
If you deposit $ 500 into an account that charges a monthly fee of $ 5, by the end of the year you will have $ 440, a loss of more than 10% of your original balance. Your money might not be as safe as you think it is if you have to worry about fees eating into your balance. Look for accounts with no monthly fees.
If you don’t plan on keeping an account open for very long, it’s important to know if there are any early closing fees. Banks that charge such fees often do so if you close the account within 90-180 days of opening.
Reason for registration
Finally, think about the reason for your savings.
If you want to build up an emergency fund that you can access at any time, it makes perfect sense to open an account with the bank you have a checking account with.
If you’re saving for a specific purpose and don’t need easy access to funds, it makes more sense to look for the best rates or choose an online bank. You can get a better interest rate, which speeds up your progress towards your goal.
At the end of the line
Savings accounts are great tools for people who want to save money for a goal or a rainy day. Consider all of your options, including small local banks and online banks, and look for the account that offers the best interest rates at the lowest cost. Taking the time to do price comparisons can save you (or earn) a lot of money.