Why Do I Need to Create a Savings Account?
Saving money can be both easy and difficult. Whether you are pinching your pennies for the next family dinner, or have an extra hundred dollars at the end of the month, saving money is an essential part of your financial future. You can use different types of savings accounts for specific reasons, but the possibilities are endless. A recession could be just around the corner, so it is important to start planning now!
Essentially, if you do not already have a savings account, it may be time to create one. Savings accounts are important for many reasons, but they can help you earn interest, reach your financial goals, and create an emergency fund! Keep reading to learn more about creating a savings account.
Is a Saving Account Right For Me?
What is the purpose of your savings account? Maybe you have a little one at home and want to start a college fund, or hope to one day take that trip to Italy with your family.
You should establish your financial goals early on. A savings account can help you reach your financial goals, such as saving for a down payment on a house, a vacation, or a new car. If you regularly deposit money into your savings account, you can routinely track your progress toward your goals and feel like you control more of your finances.
Whatever the purpose is, it is important to start by educating yourself on what a savings account can do for you!
The interest rate you receive for your savings account will depend on the financial institution and on the type of account you decide to open, but hey, it’s already a win!
The bank is essentially paying you to save money. It’s important to note that saving accounts can also come with restrictions like limiting your withdrawals or facing a fee for leaving a low balance. The APY, otherwise known as the Annual Percentage Yield, is not the same as the interest rate, but it does represent the Annual Percentage Rate (APR) of interest earned on a deposit account without taking into account the effects of compounding. If you are looking to get a new savings account, you should consider all of these factors:
- The Type of Savings Account
- The Amount You Can Deposit Per Day
- Interest Rate
A high-yield savings account is typically more popular than a regular savings account because it allows you to access a higher interest rate. So, if you save more money, you can potentially earn more money!
What are the Steps to Create a Savings Account?
When you decide to move forward with a savings account, make sure you choose the right financial institution by considering a couple of different factors. Make sure to think about the APY, balance requirements, monthly fees, ATM and in-person locations, bank access through mobile banking services, and most importantly, Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration coverage.
If you have a checking account, it is easy to open a savings account at the same bank, but consider your options when making the choice. You will need to provide some information about yourself and some documents, including the following:
- Government Identification
- Social Security Number / Date of Birth
- Address / Contact information
- Bank account information, if you have another one.
Do You Want to Create an Individual or Joint Bank Account?
You must then decide if you want to open an individual or joint account. The differences are discussed below.
If you want a savings account just for yourself, open an individual account. You will be the only one to have access to these funds and be able to authorize withdrawals and charges.
If you’re opening an account with another person, such as your partner, spouse, child, or any other person, you can open a joint account for easier access to both parties. The presence of a joint owner can potentially provide a higher level of FDIC insurance (up to $500,000 instead of $250,000).
Submit Your Application for a Savings Account
Submit your application along with all the documents that the financial institution has asked of you. The bank will open a savings account quickly if the documents are all in order. The process usually takes anywhere from a day or two. Once the application is accepted and the account is active, you will want to sign up and download your mobile app. Online banking makes it easy for the account holder to check the balance, transfer money and manage the account.
Make Your First Deposit Into Your Account
You may need to make an initial deposit when starting up a savings account. Accounts with a minimum opening deposit can be anywhere from $25 to $100. To deposit money electronically, you can transfer funds from your checking account or an outside bank account. You can also make an in-person deposit in most cases. Some charge a monthly maintenance fee and require account holders to have a minimum balance to avoid this fee. This can be negative if you don’t manage the money in the account properly.
Can I Access a Savings Account Online?
Yes, most banks give customers the ability to manage their money through an app on their phone or computer. When you go with a bank that doesn’t maintain any physical branches near you, your only option may be to open the account online. Some can often come with benefits like low minimum balances and no maintenance fees, but high APYs. There is a type of account that works best for everyone. You may just need to decide how you would like to manage your online savings account. Consider APY when making a decision, as your savings will grow faster, and fees that may cause monthly withdrawals from your savings account and deposit minimums.
Learn More About Online Banking
Savings accounts are valuable tools for people who want to set aside money for a goal or an emergency fund. Consider all of your options before you make a decision! If you want to learn more about online banking, click here!