Opening a savings account gives you a new option for stashing your extra money — whether it's for a short-term goal like saving enough to buy a certain item or a long-term place to hold your emergency fund. Over time, you can watch your money grow as interest accrues on the account, and as you save, you'll improve your financial stability so that if unexpected expenses arise, you have savings to fall back on. Keeping some money separate from your checking account also helps you avoid spending it. Here's what you need to know to open a savings account.
Steps to Open a Savings Account
The steps to open a savings account are straightforward, and you can even open an online savings account from a computer or mobile device. In some cases, however, you might need to open the savings account in person, such as if you have a limited credit history or have had issues with your checking history. In general, you must be at least 18 years old in order to open a bank account on your own.
To open a savings account, follow these general steps:
- Open an online application or go to a bank to apply in person.
- Provide identifying information, including your mailing address and Social Security number.
- Provide a form of identification, such as a driver's license or a passport.
- Be prepared to make an initial deposit to open the account. You can do this by transferring money from an existing account using your bank account and routing number. Some banks allow you to wire transfer funds or mail a deposit check to fund your new account.
Once the savings account is open, you can make additional deposits by setting up direct deposit through your employer — which saves you the hassle of cashing your paychecks — and depositing other checks you receive, either through an app or by submitting the paper check to the bank. Some banks even offer a higher interest rate to clients who set up direct deposit or automatic, periodic transfers.
Learn: How to Set Up Direct Deposit
Minimum Age to Open a Savings Account
The minimum age to open a savings account varies from bank to bank. Some banks require that you legally be an adult — age 18. But some banks have special children's savings accounts that allow minors to open an account if a parent or guardian is a co-owner on the account. Opening an account with a minor can help teach a child the importance of saving money.
Savings Account Features
When considering a savings account, note the features offered and the interest rate you'll earn. The features of savings accounts vary from bank to bank — especially savings account rates — so do some research to find the best savings account for you.
When comparing interest rates, make sure you're looking at the annual percentage yield, and beware of special savings account promotions or rates that have special conditions that you won't meet. Look at important details such as minimum balance requirements. In addition, some banks charge monthly maintenance fees, but you might be able avoid them if you meet certain minimum requirements.
In general, regular savings accounts offer a lower interest rate than high-yield savings accounts, but high-yield savings accounts typically require a higher minimum balance.
Another option is a money market savings account. The biggest difference between a savings account and a money market account is how you can access your funds. Money market savings accounts offer more flexibility, with some banks allowing you to have a debit card or access funds through an ATM, whereas savings accounts are limited to electronic transfers or calling the bank to withdraw funds. But money market savings accounts might offer a lower interest rate.
Related: 10 Best Savings Accounts of 2017
Bank vs. Credit Union Savings Accounts
When deciding where to open your new savings account, don't limit your search to banks. Credit unions can also offer competitive rates and features, but are often overlooked because they don't have the advertising budget of big banks or as many branches. Credit unions often have higher interest rates, however. In addition, with features like mobile deposit and phone apps that allow you to access your account anywhere, credit unions and online banks are attractive options despite the lack of brick-and-mortar locations.