By their technical nature, savings accounts are akin to time deposits. Technically, the bank can require the depositor to notify the bank before withdrawing the funds or charge a penalty when the account holder withdraws the money before a specified date.
While banks do not usually exercise this right, some institutions restrict the number of transactions that a depositor can make in and out of a savings account per month. They also charge fees that depend on the average balance an account holder keeps in his account. Banks do not provide checks for a savings account as a general practice.
It is relatively easy to transfer funds to and from a savings account but a depositor must observe the federal limits on the number and types of withdrawals he can make per statement cycle.
While deposits are without limits (you can make as many as you wish), the law restricts some types of telephone and electronic withdrawals (exclusive of ATM withdrawals) and transfers to only six per statement cycle.
Here are The Smart Investor Select’s picks for savings account:
Chime offers a savings account feature that offers a high annual percentage yield of 0.50%. This is an optimal savings account program with its lack of monthly fees or minimum balance requirements. There is no cap on the amount of interest you can earn in your savings account as long as you have at least one penny in your account you are eligible to earn interest.
Another added benefit to opening a savings account is the lack of minimum deposit requirement for opening an account. To open a savings account you need to have at least one chime spending account to open a savings account. This promotes loyalty and using the added features within the Chime checking system.
Chime uses two optional programs to improve your ability to save money. The program is Save When You Spend. This program allows you to save small amounts when you make purchases. Whenever you make a Chime debit card purchase, Chime rounds the transaction up to the nearest dollar and transfers the difference to your savings account.
- Savings Accounts
- Checking Accounts
- Debit Card
- Credit Cards
- What Chime products are inflation proof?
Chime does not have a traditional product line of banking products as this bank specializes in products that help you to build your credit. For this reason, the Chime products are not particularly inflation proof.
The exception to this is that there are no hidden fees or charges, so even if your other expenses are increasing, you don’t need to worry about getting stung with banking fees.
- How's Chime physical coverage?
Chime is an online only bank, so it does not actually have any physical branches. This means that the coverage area of the bank is nationwide, but if you are looking for a bank where you can visit a local branch, this is not the bank for you.
- What is required to open a Chime account?
Since Chime is an online only account, the only way to open the account is on the Chime website. To start the process, you will need to complete a screen Captcha. The website will then walk you through the application process.
As with most banks, you will need to provide some basic personal information and financial details. This includes a valid home address, your Social Security number and confirmation that you are a U.S citizen or resident aged 18+. The entire application process should take approximately two minutes.
- Is Chime worth it if I'm a student?
One of the difficulties for students is a lack of credit history and this is where Chime excels. The entire Chime product line is designed to assist those who are looking to build or rebuild their credit.
Although Chime does not offer any loan products, you can enjoy a fee free checking account with up to a $200 fee free overdraft, a great savings rate and a secured credit card. This can be a great way to establish a credit history, which may make getting other finance products easier in the future.
- Is my money safe on Chime ?
Chime has FDIC insurance, so up to $250,000 deposit funds are federally protected. The bank also has two factor authentication and supports fingerprint authentication for your data protection.
The Chime debit cards are also protected with Visa Zero Liability. So, you don’t need to worry about unauthorized charges and can shop worry free with millions of merchants.
Marcus' savings account offers an impressive 1.20% APY with no minimum deposit or fees. You can also make same-day transfers to and from other banks of up to $100,000. This makes it an excellent option for storing funds while deciding whether or not to invest in a long-term strategy.
Marcus is a subsidiary of Goldman Sachs, which is reflected in its banking products. Marcus provides high-yielding savings and CDs, as well as investment options and a variety of loans. This does not, however, include a checking account.
So, obviously, the bank's goal is for newbie investors who want to start managing their money and taking their first steps into investing. The Marcus app is rated 4.9/5 on the Apple Store and 4 out of 5 on Google.
- Savings Accounts
- Investing Platform
- Personal Loans
- Can I open a Marcus savings account online?
It is possible to open a savings account online. You’ll need to provide some basic personal and financial information. The Marcus team will then review your application and contact you with your approval details.
- Does Marcus work for Joint accounts?
It is possible to open up a Marcus savings account with two account holders. This means that both parties can enjoy co-ownership of the account and make decisions independently. So, if one account holder informs the bank of an action, Marcus will not check with the other party to confirm the action.
However, you need to open a new joint account, as it is not possible to convert a sole account into a joint account.
- Is Marcus worth for Millenials?
The general trend with millennials is to show interest in non traditional banks. Marcus has a specialized product line that could help customers to become familiar with investments and very competitive APY. The bank has a great app that can help you to manage your money on the go.
However, if you need an account to manage your day to day transactions, this is not the bank for you, as there is no checking account option.
- Is Marcus worth it if I have bad credit?
Marcus has a great savings account that is suitable for anyone, but if you want a lending product, you may need to work on your credit score. Marcus does not disclose the minimum credit score requirements, but it is likely that you will need a score of 660 or more to qualify for a loan.
- Do Marcus Offers Car Loans?
While it does not offer specific car loans, the bank does offer personal loans. These are fixed rate, no fee loans for $3,500 to $40,000, which you can use for any purpose. The specific rate will depend on your creditworthiness with a term of up to six years.
- Can you close Marcus bank account over the phone/online?
You can close your Marcus account by calling the bank’s helpline or by sending an email to the bank. The phone method is likely to be the easiest, as the Marcus team will guide you through the closure process.
Positioning itself as a mobile-only bank, Varo penetrated the fickle and volatile banking market with an aggressive marketing thrust that countered traditional bank offerings.
This savings account is a virtual account so there is no physical bankbook while you can get up to 1.20% APY. To monitor your transactions and balances, the Varo App has a utility that lets you view, download, and print your bank statement.
In Save Your Change, they simply round off eligible transactions to the nearest dollar and put the change into your savings account. In Save Your Pay, customers can nominate a percentage of their earnings that the bank will transfer automatically to their savings account.
Like the Varo checking account, this savings account does not require depositors to maintain a minimum balance. This means you can keep a very, very low amount in your account and the bank won’t charge a fee.
- Savings Accounts
- Checking Accounts
- Debit Cards
- Credit Cards
- What Varo products are inflation proof?
Varo has a limited product line that is designed specifically to assist those who are looking to build or rebuild their credit. This means that there are no traditional lending products that would be inflation proof. So, if you’re looking for a bank that offers inflation proof products, this may not be the bank for you. However, if you are looking to take control of your finances, Varo could help.
- Can you close Varo bank account over the phone/online?
If you want to close your Varo account, you will need to withdraw your funds and transfer all of your active direct deposits or automatic withdrawals to another account. At this point, you will be ready to close your account. You can do this by emailing the support team via email or calling the customer service line. The phone line is only open 8 am to 9 pm on weekdays and 11 am to 7 pm on weekends. A member of the Varo support team can guide you through the closure process and confirm your request has been actioned.
- How's Varo physical coverage?
Varo is a fully online bank, so it does not have physical locations or branches. However, you can use the AllPoint ATM network to manage your account, which provides access to over 55,000 machines across the country.
- Is Varo ready for recession?
Varo has only been operating since 2015, so we have no data on how the bank has handled previous recessions. However, with a streamlined product line and minimal lending products, Varo should be well prepared to handle the implications of the country going into a recession.
- Is Varo worth it for Joint Customers?
Varo does not currently offer joint accounts and will not allow secondary users on Varo Bank cards. So, if you are looking for an account that you can co-own with your partner or dependent, this is not the right choice of bank for you. However, Varo has stated that this feature may become available in the future. It may be worth double checking before you write off Varo as a viable option for you.
Synchrony Bank is one of the highest APY in the market today. There is no minimum balance that customers have to maintain but you need a $5,000 to open an account.
Unlike other banks that would have several options in savings account alone, Synchrony Bank offers only one type of savings account. And don’t even bother to ask for a checking account because that one didn’t make it on their list for whatever reason. Customers can access their accounts online, via mobile app, or through the thousands of ATMs that carry the Visa Plus or Accel logos.
Synchrony’s app is rated 4.8 out of 5 for both Apple and Google. IN terms of customer service, Synchrony has a 24-hour automated phone service, but if you want to speak with an agent, the lines are only open from 8 a.m. to 10 p.m. on weekdays and 8 a.m. to 5 p.m. on weekends.
- Savings Accounts
- Money Market Account
- Credit Cards
How's Synchrony Bank physical coverage?
Synchrony is a fully online bank, so it does not have any physical branch coverage. All your account maintenance is performed online through the online dashboard or accompanying app. However, there is a chat function on the website and helpline if you run into an issue you’re struggling to solve. The bank also has access to a large ATM network and you can use the ATM finder on the website or app to find a machine in your local area. So, if you are considering Synchrony, you will need to be comfortable with the idea of not having branch support.
Is Synchrony Bank ready/can fall for recession?
Synchrony has been operating since 2003 and the bank has maintained a solid track record. With its limited product line, the bank does have some protection against adverse economic times. Since the bank does not offer personal loans or mortgages, there is less risk of default if people start to struggle with their finances. So, Synchrony should be prepared for a recession and its customers still have the reassurance of FDIC insurance for up to $250,000 in deposits.
Does Synchrony Bank offer a free checking account?
Synchrony Bank does not currently have any checking account options in its product line up. This means that there is no possibility of opening a Synchrony checking account with or without a fee. So, if you do need a checking account and want your savings with the same bank, Synchrony is not the right bank for you.
How to Find the Best Savings Account?
How Do Savings Accounts Work?
Before you start looking into starting a new savings account, you will want to be sure that you know exactly what they are for. Savings accounts are essentially a place for you to store your money and earn interest, safely.
A savings account is one of the many services offered by banks. They allow you to keep your funds safe and earn annual yields from interest. Some accounts can reach 1% in those yields.
Additionally, these accounts are federally insured up to $250,000. That means you will not lose your money if the banks fail.
Savings are a crucial part of financial stability. Whether you have an emergency fund or investment funds, savings can provide security against unforeseen events or situations. As you can see in this chart using 2019 FED Survey of Consumer Finances data, Americans are saving more. In 2016, American savings had a value of $0.92 trillion. This has steadily increased over time to reach $1.29 trillion in 2019.
Many people use them as ways to set aside money, as it takes more steps to spend it than it would with a checking account. For example, you could use it to prepare funds for emergencies, a vacation, a big planned expense, and more.
When you open a savings account at a bank, your next step would be to deposit some money into it. All funds in the account earn interest, which is added into the account by the bank.
Most banks allow you to transfer money between your checking and savings accounts as you please, as long as they are opened with the same bank.
Once you have saved enough money, you can withdraw it. This factor makes them very convenient for saving money for trips, tuition costs, and more.
The bank will also pay you back interest, as a way of saying thank you for working with them.
However, the interest amounts are usually small. Many banks offer low rates, meaning you will get pennies back in interest each month.
Still, you can find banks that offer more back- if you know where to look
How's Inflation Impact Savings Account?
However, it is worth noting that inflation might have a negative impact on your savings account. When your interest amount does not keep up with inflation, the value of the money saved will slowly go down.
The reason this happens is because the price of goods tends to increase over time. A dollar you saved 30 years ago would not be as valuable as a dollar you saved yesterday. To combat this, banks tend to offer higher interest rates during times of inflation.
Still, that can take many years to happen. As long as you make sure that the bank offers a decent amount of money back in interest, your funds will not depreciate.
Is My Money Safe in an Online Savings Account?
Overall, your money is safe in an online savings account.
Where something bad to happen to the banks, your savings account is federally insured up to $250,000. That means that you can claim back the money you had saved, up to that covered limit.
What to Consider When Choosing a Savings Account?
These are the features you want to look in to when searching for the best savings account:
- Interest Rates
- No Monthly Fee
- Minimum Opening Deposit
- Automatic Transfer Options
- Mobile Check Deposits
- Ease of Withdrawal
The best way to find this information is to read the details posted on the bank’s website. It should all be listed under their savings account page.
Most interest rates at banks are low- many common options will only offer 0.01% in interest. That low percentage makes it difficult to grow your funds.
However, most people choose to store their money there for use in emergencies or for other upcoming uses. If you can find higher rates, that would be best.
Some banks charge monthly fees, others do not. Often, you will need to have a certain amount in your account to avoid the fee.
It is much easier to work with banks that do not fine you for having too little money in your account, as it makes it harder to save to the required amount. We recommend you find a bank with no fees.
Minimum Opening Deposit
You will want a low minimum opening deposit, since you are working to save. However, since you are opening the account to add funds, it usually is not a big deal unless they require a large sum up front.
Mobile Check Deposits
These days, most banking takes place online.
You will want to ensure your bank allows you to make mobile deposits, if you do not want to visit an ATM or branch. Mobile deposits normally only require you to take pictures of the check.
Ease of Withdrawal
Finally, you need to ensure taking your money out of the account is easy- especially if you are setting it aside for use if there is an emergency. Make sure there are ATMs nearby and that you can transfer to your checking account easily.
For example, it is much easier to save with automatic transfers. You can set recurring deposits into your savings, usually from your linked checking account. You will want this option, especially if you need to save a certain amount before a deadline.
Pros and Cons of a Savings Account
There are plenty of reasons that you may want to have a savings account. They make it easier to put money towards your goals.
However, it is important to consider both the pros and cons.
First of all, your money is very safe in an FDIC insured account- which all legitimate banks are a part of. They will protect your account up to $250,000, so you will not need to worry about your money there.
Finally, many banks will allow you to set up automatic bill payments online. The funds can come directly from your savings account, meaning you will not need to remember to make the payments yourself.
Many savings accounts are easy to access today. Your bank likely will offer a mobile app where you can easily transfer some of your funds to your checking account. Additionally, there are likely ATMs in your area that will allow you to withdraw cash when needed.
Besides safety and account options, savings account gives you the option to grow your money. Considering the expected FED interest rates increase, savings account provides a good alternative to other investing options.
On the other hand, there are no free meals. While there are a lot of perks, customers should take into account the drawbacks of savings accounts:
Sadly, many savings accounts offer low interest rates. Their rates are lower than certificates of deposits (CDs) and money market accounts.
Lastly, those small interest rates are allowed to be changed by the bank at any moment.
Most savings accounts also enforce minimum balance requirements. If your accounts fall below their limit, the bank will be able to charge your fees. Of course, when trying to save money, you will want to avoid this.
Do I Have to Pay Taxes on My Savings Account?
Yes, you may need to. All interest gathered by a savings account is taxable, even if it ends up being just a couple of dollars. Your bank will be required to send you a Form 1099-INT if you earned more than $10 in interest during the year.
Even if you earned less than that amount, you are still required to report the interest to the IRS and pay the taxes due on it. Luckily, this would not be much in those cases.
Interest earned in a savings account is taxed at a marginal rate. For example, if your income tax bracket puts you at 35%, the interest from your account will be taxed at that same rate.
Why It's Recommended to Have a Savings Account?
Savings account is more than a place to grow your money. It's important to maintain funds in a savings account for a variety of reasons:
- Preparation for Events – You should use one whenever you have a money goal you are trying to reach.
For instance, if you are putting money aside for your vacation, it can be handy to have. Long term goals also work great with these accounts, such as saving for a house down payment.
- Avoid Spending Money – Savings accounts are also great if you want to avoid spending money. They can help you resist the temptation to spend, since there are more steps involved to get the money back out.
If you are trying to change your financial habits, this can be a great place to start.
- Protecting Your Money – Money placed into your savings account is kept safe. If you have more than you need, you will want to protect it.
There are no risks involved like there is with investments, as your funds are insured. Plus, when you carry cash, there is always the risk of losing it somehow.
- Be Prepared – Finally, you want to have a savings account for emergencies. No one knows when they will get sick or injured. Plus, if something were to happen to your car, you would need funds for repairs. Savings accounts are a great way to keep yourself prepared for sudden situations.
How to Choose The Right Savings Account for Your Needs
The best way to choose the best savings account for yourself is to think about your needs. You will want to do all of the following.
- Check what accounts the bank offers
- Check for low fees and high interest rates
- Determine if you want a physical or online only bank
- Consider accessibility
- Look for hidden fees
1. Shop Around
First you will need to find out what accounts the bank offers. This can be done with a simple phone call or accessing their online page. You want to be certain they have savings accounts. If you are searching for checking, CDs, or money market accounts too, you can also ask about them.
Your bank should offer all the accounts you need, so you can do most of your banking in one place.
2. Compare Fees, Rates & Conditions
Savings accounts should have a decent interest rate to keep up with inflation. Most online-only banks can offer higher interest rates, since they do not have to pay to keep a branch open.
Plus, you will want to start an account without spending a ton of money. Fees add up fast. You will want to ensure either there are no minimum requirement fees or the fees are low. Best of all would be opening an account without any fees.
3. Physical or Online Bank?
You can do all of your banking online these days, if you want. Many people prefer to have physical banks that they can visit, but you do not need to. Online banks usually offer higher interest rates in their savings accounts.
Although, physical banks make it easier to carry cash on you- your preference is completely up to you.
4. Final Review
Make sure there are branch or network ATMs in your area. Plus, think about the hours the bank keeps and when you can access customer support.
You will want to avoid accounts with many fees attached, as they can quickly drain your money. Read the fine print of all documents given to you.
The Different Types of Savings Accounts
Here are the main types of saving accounts:
- Traditional savings accounts – These are likely the accounts you are most familiar with. They are a great way to save money and are offered by every traditional bank and credit union. They offer a small amount of interest as well.
- High yield savings accounts – These accounts can usually be found in online banks, as they offer higher interest rates than physical branches. If you want to manage all of your money online, these accounts are a great option.
- Money market accounts – These accounts provide more interest on your savings, while still having some options for you to access your money. You can think of them as a combination of traditional checking and savings accounts.
- Certificate of deposit (CD) – CDs are for long term savings. You need to leave the money there for a specified amount of time. When the CD has matured, you will be able to withdraw your money or move it to another CD. Online banks offer better interest rates here as well.
- Cash management account – These accounts let you invest in a taxable brokerage account or set aside money in a retirement account. They earn interest at higher rates than what you can find in many banks.
Each account can serve a different purpose. You can open more than one if needed. However, you will need to be familiar with what each account can do.
The following chart from the 2019 FED Survey of Consumer Finances shows the average amount families invest in Certificates of Deposit have grown tremendously between 2001 and 2019. In 2001, the average was just $54.10 and it steadily increased every three years. It peaked in 2010 before steadily increasing again to a high of $101.95 in 2019.
Can I Make Payments From a Savings Account?
Saving accounts are the best place to store your extra money, but they are not generally the best for making payments. You will need to withdraw some cash or transfer money to an account linked with your debit card.
Banks will not give you debit cards for your savings accounts. Plus, many will only allow you to write a select number of checks from your savings for payment.
Why Banks Don’t Let You Make Payments
Savings accounts were designed by banks to be a long term storage for money. That means they are not made to make payments. The federal law sets limits for withdrawal from savings accounts- if you go above that limit, you will be fined.
Banks get into trouble when you make more than six withdrawals from the savings account in a given month. That is why they do not give you checks or debit cards for those accounts, it would be way too easy to make more than six withdrawals in that time frame.
However, you are still able to make as many deposits into your savings accounts as you want.
Should I be Concerned About Inflation?
There is no way to avoid inflation, so you should not worry about it too much. However, that does mean that your savings accounts are not the best place to plan for retirement. You will want to find better long term saving methods in those cases.
For short term savings, these accounts are perfect and not going to be impacted much by inflation. However, you can consider these alternatives.
For Long Term Savings
When it comes to saving for a long time, you will want to consider a 401k or IRA. They offer a good annual return, allowing you to fight inflation. Plus, they make it easier to save your money with direct deposits.
For Short Term Savings
If you need to save for a little while, it would be best to put aside more money than you think you need. That way, you can still pay for your home down payment or vacation with little worry. Within a year, inflation will not change much, so you may not even notice it.
Another option would be to open a high yield CD. Once it matures, you will have more money than you put in- usually much more than the amount impacted by inflation. Most CDs require a few years before you can use the money, so it is best if you do not need the money too soon.
Online Bank or Credit Union Savings Account?
Both banks and credit unions provide a platform to keep and grow your money. However, there are some key differences between them:
An online bank can provide you with a lot of advanced banking methods. Since everything is done online it is often convenient, as long as you do not need cash often. The online bank will offer a mobile app, allowing you to check on your accounts anywhere.
Banks also tend to offer more ATMs than credit unions do, so you will be less likely to pay fees to use the machines. Online options also have the added benefit of not having to pay to run physical branches- allowing them to offer better, higher interest rates with their accounts.
Credit Unions will usually have lower fees, although they have less features offered online and in apps. They are nonprofit organizations as well, meaning you will have plenty of options, without hidden fees or other charges. Additionally, they are known for offering better customer service.
Finally, not all Credit Unions are insured. When you open your savings account, you will want to know that your money is safe there. Be sure to look into whether or not the union is FDIC insured.
When it comes down to it, the choice is up to you and your personal preference. Both offer great services and are perfect for starting a savings account.
How Much Money Should I Keep in My Savings Account?
When planning your savings, there are a few general rules that you will want to follow. Although, the amount saved will vary from person to person.
The best way to figure out how much to save would be to look at your essential monthly payments. Add together your groceries, transportation costs, debt repayments, insurance costs, rent or mortgage, and other essential expenses.
If there is an emergency you want to be sure you have between three and six months of savings backed up. That way, you will not find yourself in debt and will still be able to buy groceries and essentials.
So, if your monthly expenses are $2,000, you will need three months worth saved, which is $6,000. If you want to have six months saved, that would be $12,000. Of course, you do not need to throw all of that into your savings account at once. You can do so a little at a time.
Calculations You Should do Before Picking a Savings Account
Before you pick a savings account, think about how much you need to meet your goal. Are you building an emergency fund that is three months worth of money for essentials? Or are you saving for a down payment on a home?
You will want to calculate how much money you can set aside per week or per month. That way, you always can confidently set aside funds for your account.
The annual interest rate will add into how long it takes to reach that goal as well, so make sure you do some research into the banks first.
How Long It Will Take to Save?
Interest rates can assist you in getting to your goal a bit faster. If you are interested, use a special calculator to determine that amount of time. The sooner the goal is reached, the better for you.
Best Uses For a Savings Account
There are plenty of uses for a savings account. These are the best reasons to use one.
- Save for your goals
- Prepare for emergencies
- Cover large expenses
1. Saving For Your Goals
The most important use of a savings account is using it to reach your financial goals. If you are trying to save for a down payment on a house, you already know it is not cheap.
However, it is much easier to save in an account that is not your checking, which has funds constantly moving in and out of it.
Savings accounts are easier to put money into, without having to take it back out. It might help you avoid the temptation to spend your savings if you think of it like a piggy bank.
2. Prepare For Emergencies
Emergencies are sudden and not something that you can always plan for. If you do not have any savings, they can be very difficult to manage.
Savings accounts are great for setting aside extra funds, allowing you to build up an emergency stash. The more you can set aside, the better off you will be if something were to happen.
3. Cover Large Expenses
Savings accounts are great for covering other large expenses. For instance, you need to buy a new computer. You can save the funds in a short amount of time, meaning a savings account would be your best option.
No matter your reason for saving, these accounts make it much easier to do so. Only using a checking account or cash can be difficult, since you would be much more likely to spend your savings that way.
Top Savings Accounts From Our Partners
The product offers that appear on this site are from companies from which this website receives compensation.
Top Savings Accounts From Our Partners
The product offers that appear on this site are from companies from which this website receives compensation.
Common Savings Account Fees – How to Avoid Them?
When it comes to savings accounts, there are usually some fees associated with them. There are ways you can avoid them, however.
Overdraft or Non Sufficient Funds Fees are the most common ones. Many banks will charge you $35 per overdrawn item on your account. Some banks can charge less, but you will still want to avoid this fee, as it can become a slippery slope.
Your best bet will be to check your account often. If you notice an overdraft or realize that one is about to happen when an item goes through, you will want to take care of it right away. You can transfer money into your account from another account to keep your funds from dropping too low and charging you.
Overall, the best way to avoid these fees is to keep an eye on your account- even if it means checking it daily or more often.
How Many Savings Accounts Should I Have?
You can open as many savings accounts as you want- there are no limits and doing so does not hurt your credit score. However, that might not be wise, since you could not focus your money in one area.
If you choose savings accounts that do not charge fees or require minimum balances, they will not cost you much either. So, when is it a good idea to have multiple saving accounts?
When You Should Open More?
If you want to reach a specific goal fast, you can open more than one. Many banks allow you to change the names of the accounts online too. You could have an account for vacation, then your normal savings.
Plus, they make automatic bill payments easier. For example, you could have an account just for your bills. If you keep the amount of the expense in that account and it comes out automatically, you would not need to worry about accidentally spending that needed money somewhere else.
Savings vs Checking Account
Here are the main differences between checking and savings account:
To summarize, a checking account lets you write checks from it. They are also linked with debit cards most of the time. These accounts are responsible for your daily transactions. Your checks from your job are deposited here as well.
Once you receive money into your checking account, you can deposit amounts into your savings account as you see fit.
You access your savings much less often. They are a safe place for you to store your money that you are not quite ready to spend just yet. You can store a lot of money here, since there is less coming out for expenses.
Plus, you can have as many savings accounts as you need. Many people have multiple for certain goals, emergency funds, or just as a place to grow their money. Checking does not offer interest either, while a savings account does.
What Else Should I Know About Savings Accounts?
For the most part, you want to be aware of their fees and interest rates. However, you should also know one more thing.
The interest rates are not great. But, if you have multiple accounts with the same bank, you may earn more interest.
This is because the bank will look at all of your accounts. If you have options open for your general savings, mortgage or rent payments, bills, and more- they will add all of those together to determine if you can earn higher interest rates.
As an example, suppose your bank currently has you at 0.03% interest. You can earn up to 0.06% if you qualify for their rewards. To do so, you need to reach a certain amount of money across your saving and checking accounts.
By reaching that amount, you will now receive a higher interest rate- making it even easier to continue saving.
So, do not hesitate to open multiple savings accounts with different purposes and goals behind them. The more you save, the more likely you are to get a better interest rate.
Savings Accounts vs Money Market Accounts
The most noticeable difference will be how you access your money. A regular savings account requires that you make withdrawals or transfer money out to access it. Money market accounts are a bit different.
Money Market Accounts
These accounts allow you to access your funds in different ways. First, they typically allow you to write checks associated with them. Plus, you can use debit cards for withdrawals or at ATMs to take money out of the account.
MMAs also tend to have higher interest rates, making them a good option for short term savings goals. However, many people tend to prefer normal savings accounts, since just about every bank offers them already. There would be no need to start visiting another bank and all of their information would be available in the same online account.
What Does My Bank do With My Money?
Banks use the money people deposit into them to make loans. They are essentially using the money to make more money, which is why they provide you with interest. It does not matter how you deposit the funds, they can all be used by the bank in this way.
Overall, banks are selling financial products to their customers. That is why they work with loans- so they can earn more through balancing other customers. However, that is why your account receives a fee when you take out too much or you withdraw more than six times a month.
How Do You Open a Savings Account?
- Determine what paperwork you need with the bank
- Decide if it is going to be joint or individual
- Submit an application online or at the bank
- Open the account by adding money
Before you do all of that, make sure that you know what the interest rates and first deposit fee are going to be. That way, there will be no surprises.
It is different at every bank. You may need to call ahead to make plans and collect the paperwork you need.
Should You Open a Savings Account For Your Child?
This is a wonderful way to help teach your child about money and make them more financially responsible when they are adults. These accounts do not have checks or debit cards associated with them, so your child will not be able to take money from them without your permission.
Will you need to be present and have all of the needed documents ready to get started. We recommend calling the bank ahead of time to determine what you can do.