Most people have at least two kinds of accounts: a savings account and a checking account. In my case, my checking account holds my money temporarily before it gets various uses. On the other hand, my savings account is my holding account since it keeps my money safe and accessible until when I am ready to spend on my financial goals.
That said, there are many savings accounts offered by various institutions, from traditional banks to online-only banks. There are so many options to choose from that it can be very confusing. However, do not fret; I will give you some pointers to help you get a good savings account.
Decide on The Purpose
Each one of us has different goals for saving money. My saving goal is to create an emergency fund, whereas, for you, it might be to save up for a down payment on a home or a car. Others might want to save up for home repairs like restoring HVAC systems (perhaps with the help of experts at Blueox Energy Products & Services) or fixing faulty door locks and CCTV cameras. Yet others might save for traveling or pet expenses. That said, if you want to save for multiple goals, you might need to get an account that allows you to partition your money as per your needs.
Anyway, if you intend to move the money a lot, you should avoid a savings account since withdrawals are limited to six times a month. The best account, in this case, would be a cash account with a high Annual Percentage Yield (APY). This could help you to withdraw the funds whenever you intend to, be it during a home renovation project (when you might need to opt for a variety of services like Wood Floor Cleaning, or fixing plumbing issues) or during a medical emergency.
Know What Matters to You
When I was looking for a savings account, I wanted an institution with excellent mobile banking services and ease of access to money. That is why I went for a bank with a mobile application. Apart from mobile banking, the other factor that I was unwilling to compromise on was a good interest rate. Your needs might be different from mine, but you have to define them before getting a savings account that matches your goals.
Deciding on Getting an Account with Your Current Bank
When deciding to create a savings account, I decided to go for a new bank. I did this so that I do not have easy access to the money. According to Crossroads Bank and the likes of it, however, if you want the ease of accessing all your accounts from one bank, then getting a savings account with your existing bank should work for you.
Usually, people opt for the second option because they do not want to go into the hassle of doing all the paperwork in case they need money during an emergency. For instance, storms in my neighboring state are quite frequent, and so are home repairs. Every time, after a cyclone hits the state, homeowners need to get their roofs fixed or rebuilt with the help of new construction roofing contractors. Even their windows and doors need restoration after the wreckage caused by the natural calamity. Truth be told, these are all urgent services and need to be done immediately after the storm passes away; otherwise, such people would have no place to inhabit! In such cases, it is easier for the homeowners to take out money from their savings account in the existing bank without having to really waste time behind paperwork. However, where I live, storms are not that frequent, nor are any home repairs, so having a savings account in a new bank does not bother me–I pretty much get time to fill in any documents needed when I need to access the money.
Interest Rates
When choosing a savings account, I went for high-yield savings accounts. These accounts are like a regular savings account, but they offer a higher interest rate than traditional accounts. Traditional savings accounts earn very little interest, an average of 0.05%. On the other hand, high yield savings accounts have an average interest rate of 0.5% to 1% annually. This interest is not a lot, but it is twenty times more than that offered by traditional savings accounts.
Read the Fine Print
If you like to scheme over documents quickly, you will want to carefully read the account disclosures and terms before signing anything. You need to take note of the following issues:
Minimum Balances and Deposits
My savings account required that I keep a certain amount of money in my account at all times so that I can get the interest. These minimum balances vary across banks and if one does not appeal to you, then keep on looking till you find one that does.
Monthly fees
It makes no sense to have a monthly maintenance fee on my account because I want to grow my money. I avoid savings accounts that have a maintenance fee. Plus, there are plenty of high yield savings accounts to choose from that have no maintenance charges.
You also need to assess other issues like:
- Transaction, Withdrawal and ATM fees
- Limitations on deposits and withdrawals
- Type of APY used for the account. Is it an introductory, variable or fixed Annual Percentage Yield (APY)?
- Compounding frequency of interest
Do not Overthink It
Do not let the information above overwhelm you. All you need to do is open a savings account with a reputable bank that offers you a good interest and does not charge any monthly fees. This reduces the pressure and worry and you can always access your money at any time you want. Plus, you can open as many savings accounts as you want so that you are not constrained to one account.
