Opening a savings account is essential for a variety of different reasons. A savings account is where you place all your extra cash, and it allows you to build interest on the money you keep in the account. But before you go ahead and open one, there are a few things you should know. Like, do you need to make regular withdrawals from the account? Or how long do you actually plan on saving in the account?
There are so many options and variations that it can get difficult trying to choose the right account for you. So, let’s talk about some things you should know before opening a savings account.
Types of Savings Accounts Options Available
Banks offer several saving accounts that include: regular savings accounts, high-yield savings accounts, money market accounts, and special savings accounts.
All these accounts have varying interest rates and different features as well. There are savings accounts directed towards different individuals, like senior citizens, young adults, or working professionals.
Go through all these different types of accounts before you open a savings account with your bank. See which ones you qualify for, as most accounts have different requirements. Make a decision after you weigh in all the benefits you may get with each account!
Interest rates are the most important factor to consider when opening a savings account. Most banks offer interest rates as low as 0.01%! The average savings account interest rate is a measly 0.06%. You won’t be making any money if the principal amount you place in these accounts is low. Opening your account in the bank that is closest to you might seem convenient, but try and find a bank that is willing to offer you interest rates that are competitive and higher than average.
Access to your Savings Account
Most savings accounts have limited withdrawals available to you. If you are opening an account just to save up and use in case of emergencies, then these accounts might work for you.
But remember, if you withdraw over the set limits, you will be losing money in fees or lower interest rates depending on the bank and contract. Some savings accounts require notice before you can withdraw from the account, which could mean waiting upwards of a whole day before getting access to your own money!
Stay Away from Bonus Traps
You might find an unbelievable deal with highly competitive interest rates, but be careful and read all the fine prints before you accept a deal. Some accounts offer amazing short-term bonuses that go away after the first year. Don’t get duped into opening a long-term account with a bank that’s only giving you short-term bonuses. Of course, you could open with these banks and move your money elsewhere after the bonuses have disappeared.
Initial Deposits and Minimum Requirements for a Savings Account
Most banks and financial institutions require a minimum initial deposit and a minimum balance you should keep in the account. Initial deposits can start from as low as $5 and go up to $100 or higher. Minimum balance requirements are also something you need to look out for. If your balance drops below the required minimum, you may have to pay fees or penalties.
Try and look for accounts that don’t have these requirements so that you can use your account as freely as you want.