Opening a savings account can help put you on a path to improving your financial health. These products, found at banks and credit unions, allow you to deposit money and keep it safe while earning interest.
If you’re looking for a way to meet your savings goals, here’s a step-by-step guide on how to get started with a savings account.
How to open a savings account (step-by-step):
Banks and credit unions often make opening a savings account a fairly quick and straightforward process. These are the steps you’ll generally take:
- Gather documents needed. In order to make the process run smoothly, have these documents handy: Two forms of identification, such as a driver’s license and a government-issued ID or passport, your Social Security number and external bank account info (account and routing number) in order to fund the new account.
- Choose how to apply. Depending on the institution, you may be able to apply online, in person or by phone.
- Pick a single or joint account. You can either open an account on your own or with someone else. If you’re opening a joint account, you’ll need the joint account holder’s personal information.
- Decide on a deposit amount. Some institutions require an initial deposit in order to open an account, while others do not. Keep in mind that the sooner you deposit money, the faster you start earning interest. Depending on the bank, you may be able to fund your account by providing a routing and account number from another bank account, presenting a check in person, mailing a check to the institution or making a wire transfer.
- Complete your application. Submit your application online, in person or over the phone. It might take a few days for the bank or credit union to approve and set up your new account.
- Download the app. Many banks offer mobile apps that allow convenient banking on the go.
Can I open a savings account online?
Many financial institutions now offer you the option to open a savings account online, and it isn’t as much of a time commitment as you might think. Ever-improving technology is making the sign-up process speedier than ever at some banks.
Ally Bank, for example, claims you can open a savings account in just five minutes. Bankrate voted it as one of the top online banks of 2020. Marcus by Goldman Sachs also says you can open an online savings account within minutes.
In terms of overall online experience, Bank of America leads the way, according to Javelin’s 2019 Online Banking Scorecard. The research-based advisory firm ranked the digital experience of banks based on six categories, including ease of use, security empowerment, financial fitness, money movement, customer service and account opening. Bank of America received Javelin’s “Best in Class” designation, ranking as a leader in five of the six categories. BB&T and USAA were also overall leaders in the study. In the account opening category, Bank of America, Regions and Wells Fargo were at the top of the list.
Ultimately, the digital experience of a bank is somewhat subjective. Whether a particular bank’s online experience is a fit for you depends on your preferences.
Before opening a savings account, do your research
It’s easy to find and open a savings account at your local bank or credit union, but you could be missing out on higher yields if you don’t shop around.
Before you decide on an account, make sure to consider your savings goals and compare savings products from several different institutions. Then read the fine print to decide which account will best meet your savings needs.
Identify your saving goals
Having somewhere to stash your savings is important. But don’t open a new account without considering why you need one. For example, you might be opening a savings account as a place to keep your emergency fund or simply as a temporary spot for money you’re going to invest in the future.
Once you have a better idea of what you’re saving money for, you’ll be able to choose an appropriate account. If you’re saving for a vacation or you’re trying to replace an old appliance, you’ll likely want a high-yield savings account that can help you save more money in a shorter period of time. Any instance where you may need the funds quickly will require a liquid account. Savings accounts and money market accounts are generally liquid accounts because, unlike certificates of deposit (CD), they don’t have a penalty when you withdraw money up to a certain amount of times per month. Then, establish a rhythm where you keep adding money into your savings account.
“Successful saving is all about the habit,” says Greg McBride, CFA, Bankrate chief financial analyst. “Establish that habit with a direct deposit from your paycheck into a dedicated savings account. You’re one step closer to your savings goal each pay period and it happens automatically.”
If you need help saving money, check out these 20 tips for growing your savings.
Look past the big banks
The biggest banks may offer products with a lot of bells and whistles. And some have enticing bank account bonuses, and occasionally, offer great rates.
But limiting yourself to a single type of financial institution, like big banks, is a mistake. It’s important to look at a wide range of options.
“Shop around to find the best returns,” McBride says. “The biggest bank with the most branches isn’t likely to be the place you find the best return, so look at community banks, credit unions, and online banks.”
You can compare rates on savings accounts and money market accounts on Bankrate to find the right account for you. Online banks in particular often pay a higher rate than the national average. That is because they don’t have the overhead costs associated with brick-and-mortar banks and they tend to pass those savings along to their customers.
Credit unions are a good place to search for products as well. Some of these member-owned institutions consistently offer higher-than-average yields.
Comparing the best savings account rates is a good idea, but don’t stop there. See how savings accounts stack up in terms of their monthly maintenance fees, excessive transaction fees (for more than six certain transfers or withdrawals per statement cycle) and minimum balance requirements.
These days, it’s easy to find a free savings account that requires a low minimum deposit: Look into both the minimum balance required to avoid a maintenance fee and the minimum balance required to earn a certain APY.
Make sure the accounts you’re assessing have all of the features you want, like mobile check deposit and account alerts. And pay attention to what’s included in the fine print. If you’ll need to transfer money to your checking account, find out how long that transfer will take.
Lastly, only look at banks and credit unions that are insured either by the Federal Deposit Insurance Corp. or the National Credit Union Administration. Those accounts are insured up to $250,000 per depositor per account. If the institution fails, you will get your money back.
(Featured image by Hero Images / Getty Images.)