Opening a savings account is a great way to protect your money and build your financial foundation.
Thebest savings accountsfeature higher-than-average interest rates and no monthly service fees.
They also offer low or no minimum balance requirements.
Looking to earn more interest? Check out our review of thefive best high-yield savings accounts.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help…
1.
Choose a Financial Institution
Nearly every bank and credit union in the U.S. offers a savings account.
You want to find one that meets your specific needs and financial goals.
Every savings account lets you make deposits and withdrawals.
Any savings account you open at anFDIC-insured bankis protected for up to $250,000.
The averageannual percentage yield(APY) for traditional savings accounts is about 0.06%.
Somehigh-yield savings accountsoffer APYs between 0.5% and 1.5%.
But keep in mind that interest rates change depending on economic conditions.
The APY is how much interest you earn on your money each year.
Still, it pays to shop around and explore your options.
You might find an online savings account with a higher interest rate than your current bank provides.
It generally takes 10 to 20 minutes to open a savings account online.
Gather Your Identification and Documentation
Each banking institution requires personal identification and documentation to open a savings account.
Gather this information now to save time during the app process.
You generally must bring two current forms of identification for the child.
Choose a Single or Joint Account
Nearly all banks offer both individual accounts and joint accounts.
Youll need the same documentation and information listed above for anyone else listed on the joint account.
Fund Your Account
Some banks require you to deposit a certain amount of money to get started.
Other banks dont require a minimum opening deposit at all.
Accounts offering higher interest rates tend to have higher opening balance requirements.
Some banks may also let you fund your account by mailing a check or scheduling a wire transfer.
Submit Your utility
All set?
Its time to submit your app.
Once your account is established, you could set up online banking and download the banks mobile app.
This on-the-go access makes it easy to check your balance, transfer money and monitor your account.
you’re able to also set up direct deposit and schedule automatic recurring transfers.
Putting your savings on auto-pilot is the best way to save money consistently over time.
It helps make saving money a habit instead of an afterthought.
If your savings account charges a monthly maintenance fee, it usually ranges between $4 to $5.
You may also avoid monthly maintenance fees by holding your savings account and checking account at the same institution.
Avoiding a monthly fee is important because most savings accounts earn very low interest rates.
High-yield savings accounts tend to charge higher monthly fees than standard accounts.
it’s possible for you to usually get this fee waived by maintaining a high account balance.
Some online-only savings accounts dont charge recurring maintenance fees or minimum balances.
However, they still carry excessive withdrawal fees like traditional banks.
This didnt include withdrawals made in person, at ATMs or by mail.
In April 2020, the Federal Reserve issued a final rule to suspend the limit on savings account withdrawals.
However, some banks and credit unions still choose to impose a penalty for exceeding the usual six-withdrawals-per-month limit.
Some banks charge a fee for each withdrawal that exceeds the limit.
These fees can range $5 to $15 for each additional transaction.
Incidental Fees
Banks and credit unions may charge account holders other fees, known as incidental fees.
These fees are often used as a penalty to discourage certain consumer behaviors.
You want to find an account with few fees, easy access and a competitive interest rate.
A traditional savings account typically earns an APY between 0.01% and 0.06%.
Some high-yield online savings accounts earn interest rates between 0.5% and 1.5%.
This can help your savings grow faster.
Of course, interest rates arent everything.
You also want to consider what youre saving for.
This way you might quickly access your money if you get hit with an unexpected bill.
Linking your savings and checking account is also a good way to avoid overdraft fees.
Another benefit is simplicity: You wont have multiple accounts spread across different banks.
This way you’re free to earn as much money as possible over time.
Here are some important questions to consider before opening an account:
Frequently Asked Questions
It depends.
Some banks dont require any minimum deposit to open an account.
Others charge as little as $1.
A high-yield savings account usually requires a bigger initial deposit.
This can range from $100 to as much as $5,000.
Brick-and-mortar banks let you open a new savings account on their website.
This is often faster and easier than going to a physical bank or opening an account over the phone.
Theres also plenty of online-only banks to choose from.
Many online banks offer higher APYs and low fees.
They tend to have accessible mobile apps that make it easy to manage your finances.
Money market accounts and savings accounts share many similarities.
For example,money market accountsoffer the interest-earning power of a high-yield savings account.
But unlike a checking account, it isnt intended for everyday purchases.
Youre capped at six transactions a month, just like a savings account.
it’s possible for you to open a money market account at many traditional and online banks.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
