8 Things to Look For in a Savings Account

Choosing a savings account is important to building financial stability and reaching your savings goals. From high interest rates and low fees to convenient access and robust customer service, every aspect of a savings account plays a vital role in helping you achieve your savings goals. Your decision can bring you closer to (or farther from) your dreams.

When choosing a savings account, consider your financial goals, liquidity needs, and risk tolerance. It’s often beneficial to combine different savings accounts to meet specific objectives. Take control of your financial future by finding the ideal savings account that suits your needs.

What is a Savings Account?

A savings account is a type of bank account specifically designed for holding and growing your savings. Unlike a checking account primarily used for everyday transactions, a savings account offers a safe place to deposit and accumulate money while earning interest.

Why You Want a Savings Account

A savings account offers a range of advantages, including a secure place to save, easy access to funds, potential interest earnings, and the ability to track and grow your savings. It is a cornerstone for financial stability, future planning, and achieving your short- and long-term financial goals.

Saving for Future Goals 

A savings account provides a safe and secure place to accumulate funds for various goals. Whether you’re saving for a down payment on a house, a dream vacation, emergencies, or retirement, a savings account helps you separate and grow your money specifically for those purposes. Bank of America, for instance, offers personalized planning to help you track your short- and long-term goals.

Easy Access to Funds 

Unlike other investment or retirement accounts with withdrawal restrictions, a savings account offers easy access to your money whenever you need it. You can withdraw funds from your savings account using various methods, such as ATM withdrawals, online transfers, or in-person visits to the bank.

Safety and Security 

Savings accounts provided by reputable banks are typically Federal Deposit Insurance Corporation (FDIC)-insured, which means your deposits are protected up to $250,000 per depositor, per bank. This insurance ensures that your money is safe even if the bank fails and will be returned to you.

Earn Interest on Savings 

One of the primary benefits of a savings account is the ability to earn interest on your deposited funds. Although interest rates may vary, having your money in a savings account allows it to grow over time, providing additional income and helping you beat inflation.

Financial Discipline and Organization 

Having a designated savings account creates a separate space for your savings, which can help you maintain financial discipline and stay organized. It allows you to track your progress, monitor your savings growth, and maintain a clear distinction between your spending money and your saved funds. With Ally Bank, you can sort your money into “buckets,” so you can spend and save for specific targets in the same account.

Emergency Fund Preparation 

A savings account is an ideal place to build an emergency fund. A safety net of readily available funds in a savings account provides peace of mind and protects you from unexpected expenses or financial emergencies.

Establishing a Banking Relationship 

Opening a savings account with a bank is often the first step in establishing a banking relationship. This can pave the way for additional financial services like checking accounts, loans, credit cards, and investment options.

How to Open a Savings Account

Start by researching different banks and financial institutions to find the one that suits your needs. Look for factors such as reputation, fees, interest rates, customer service, and convenience.

Compare the interest rates offered by different banks. Higher interest rates mean your savings will grow more quickly over time. Consider whether the interest is compounded daily, monthly, or annually, as this affects your overall earnings.

Check for any maintenance fees, transaction fees, or minimum balance requirements associated with the savings account. Aim for an account with low or no fees to maximize your savings.

Consider the accessibility of your savings account. Look for features like online banking, mobile apps, and ATM access that make managing your account and making transactions more convenient.

1. Interest Earnings

Savings accounts allow you to earn interest on the money you deposit. The interest rate can vary based on the account type and institution. Citi Bank currently has savings accounts with a 3.85% annual percentage yield (APY).

2. Deposit and Withdrawal

You can deposit money into a savings account through direct deposits, transfers, or in-person deposits at a bank branch. Withdrawals can typically be made in various ways, such as ATM withdrawals, online transfers, or in-person withdrawals.

3. Minimum Balance Requirements

Some savings accounts may have a minimum balance requirement to maintain the account. Falling below this balance could result in fees or loss of certain account benefits. Discover Bank does not have a minimum opening deposit or balance requirement. 

4. Account Access

Savings accounts offer different access methods, including online banking, mobile apps, telephone banking, and physical bank branches. These features allow you to manage your account, check balances, and initiate transactions conveniently. 

5. Automatic Transfers

Many savings accounts allow you to set up automatic transfers from your checking account to your savings account. This feature lets you automate your savings and ensures regular contributions without manual intervention. Wells Fargo has a Way2Save savings account that automatically transfers money into your account each time you use your debit card.

6. Statements and Documentation

Banks provide periodic statements that detail your account activity, including deposits, withdrawals, and interest earned. You can access these statements online or receive them via mail.

7. Overdraft Protection

Some savings accounts can be linked to your checking account for overdraft protection. If you have insufficient funds in your checking account, the bank automatically transfers money from your savings account to cover the shortfall.