Here's the lowdown on saving those dimes
Navigating the process of establishing a savings account: Here are 7 crucial steps to follow
Kickstart your savings journeyWith a savings account, you can securely store your emergency fund or stash cash for short-term financial goals. Most banks in the US offer these accounts, enabling you to let your money grow through interest.
Getting startedOpening a savings account entails a few steps, including shopping around for reasonable fees and decent yields, gathering the necessary documents, and setting up online banking.
Setting up your savings account
- Choose wiselyPick the ideal bank that suits your requirements, keeping factors like a reasonable annual percentage yield (APY), low or no minimum balance, and negligible monthly fees in mind. Consider whether the bank offers easy-to-access fee-free ATMs, extensive branch networks, robust online and mobile banking services, and FDIC (Federal Deposit Insurance Corp.) or NCUA (National Credit Union Administration) insurance coverage. If a bank provides multiple savings accounts, compare each one based on relevant criteria and pay attention to any special features unique to each account.If you're working to cultivate a savings habit, look for accounts that automate the process, like those offered by Bank of America.
- Hand over your paperworkCollecting your identification (ID), social security number, birth date, present address (and proof if your ID lists a different address), contact info, and banking details is crucial when opening your account. You may need to temporarily lift a credit freeze to do so.
- Choose your companionOpen an individual account if you're saving on your own, or opt for a joint account if you're sharing your savings with another person. Joint accounts have benefits, such as making it easier for your spouse or dependents to access funds shared between you, and increasing FDIC or NCUA insurance coverage up to $500,000.
- Fill out the formComplete the application with all required information, and wait for the bank to sanction your account. This usually happens in a matter of minutes to a few business days.
- Fund the accountSave up an initial deposit, typically between $25 and $100, to open your account. You can deposit cash or a check when opening in person, or make an electronic transfer using mobile check deposit or linking an existing account.
Be mindful of monthly maintenance fees; some accounts may charge these fees, which can erode your savings balance. Avoid such fees by maintaining a sufficient minimum balance or meeting certain requirements like a minimum number of transactions or direct deposit.
- Appoint a beneficiaryDesignate someone to inherit the funds in your deposit accounts upon your demise. This ensures your money ends up where you intend. Joint accounts require naming a beneficiary in case both account holders pass away.
- Plan your savings strategyAlthough opening a savings account is a significant step, it's just the beginning of your savings journey. To get the most out of your account, develop a savings plan, including setting specific goals, making a budget, and automating your savings through recurring transfers from your checking account or direct deposit.
Online options are aplenty
Most banks and credit unions allow online banking—including opening a new account. If you prefer a bank without physical branches, you'll likely need to open the account online. Online-only banks offer competitive savings account options, with minimal balances, zero or low maintenance fees, and high APYs, making them attractive choices for those who are comfortable doing transactions digitally.
Opt for the best savings account
The ideal high-yield online savings account can help you earn a competitive return while avoiding maintenance fees. Bear in mind that APYs on savings accounts are typically variable, which means the rate can change at any time.
APY
A higher APY translates to faster savings growth.
Fees
Avoid accounts that charge a monthly maintenance fee if you aren't able to meet certain requirements. Some banks impose closing fees if you close an account within the first 90 to 180 days.
FDIC Insured
Go for banks and credit unions that offer FDIC or NCUA insurance, depending on the institution, to protect your deposits up to the insured limit.
Reason for saving
Your savings goal can influence your choice of savings account and bank. If you're building an emergency fund, it's wise to opt for a bank where you also have a checking account for quick access. If you're saving for a goal that doesn't require immediate access, explore various options to maximize your earnings.
When doors close, knock on others
Banks may deny savings account applications for a variety of reasons, such as unpaid fees or a history of bounced checks. Often, banks use consumer reporting agencies like ChexSystems to aid their approval decisions. If your bank uses ChexSystems and you're denied an account, you can request an explanation. Address any errors that negatively impact your standing with the agency.
If your banking history poses challenges, search for banks offering "second-chance accounts," which offer basic checking account features such as ATM access, bill pay, and mobile banking. Maintaining a good account standing for a specific timeframe often allows you to upgrade to a traditional savings or checking account.
Final thoughts
Savings accounts are vital tools for individuals aiming to set aside funds for financial goals or emergencies. Consider a range of options, both local banks and online banks, and prioritize accounts offering high yields and low fees to maximize your savings growth while minimizing expenses. Taking the time to compare rates and terms can lead to a more profitable savings journey.
- When considering a savings account for personal-finance, make sure to compare several banks in the banking-and-insurance industry to find one that offers a high annual percentage yield (APY), low monthly fees, and insured protection through either the FDIC or NCUA.
- As you strive to cultivate a savings habit, opt for a high-yield online savings account that offers competitive returns, minimal fees, and easy-to-access digital services to help you reach your short-term or long-term financial goals more efficiently.
