Table of contents:
- How to open a savings account
- How to choose the right bank and type of savings account
- Tips for maintaining and using your savings account
- How to open a savings account FAQs
How to open a savings account
There are five basic steps you need to follow if you want to open a savings account:
- Assess and compare the available choices.
- Collect the necessary personal information and documents for the bank to review.
- Visit the bank or apply online.
- Fund your new account with the minimum initial deposit, if required.
- Establish internet banking to start managing your account online.
Let’s break down each one of these steps.
1. Assess and compare your available choices
While a checking account is a convenient place to store everyday cash for stuff like paying rent, buying groceries or going out with your friends, a good savings account will help you grow your money over time and curb the temptation to spend it.
Start by researching different banks or financial institutions to find one that suits your needs. You can choose between a traditional brick-and-mortar or an online bank. Consider factors such as customer service, fees, minimum balance requirements, convenience and reputation.
You also want to evaluate the interest rates of different types of savings accounts. Basic savings and money market accounts offer easy access to your money but typically have lower interest rates. Conversely, high-yield savings accounts, such as Certificates of Deposit (CDs), offer higher interest rates but may have restrictions on withdrawals. Find out the interest rates of different money market accounts, CDs and savings accounts, to find the best option for you.
Unless you are willing to risk all your savings for a higher return, make sure your savings are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC protects your money if a bank fails by insuring deposits up to $250,000 per person per institution. Its insurance covers savings accounts and individual retirement accounts (IRAs). Investment types like stocks, saving bonds, insurance policies and mutual funds do not have FDIC coverage.
2. Collect the necessary paperwork
Most banks require documentation when opening an account. Collect the items you'll need, including:
- Driver's license or government-issued ID
- Date of birth
- Social Security number
- Phone number
- Contact information
- Proof of physical address
Most of these documents verify your identity and location. Your Social Security number is needed for annual tax statements reflecting your taxable interest, as most savings accounts require paying taxes on the earned interest. Bring these documents if opening an account in person, or upload them to the bank's website for online account opening.
How to open a savings account without a Social Security number
You can still open a savings account in the U.S. if you don’t have a Social Security number (SSN). The steps are similar to those for people with SSN, but you’ll need to provide alternative identification. Some acceptable ones include an Individual Taxpayer Identification Number (ITIN), a driver’s license or a passport number and the name of the country that issued the passport.
Without a Social Security number, you’ll likely be unable to open a savings account online. Instead, you’ll need to visit the bank branch with the documents required to open the new
3. Visit the bank or apply online
If you’re applying for a savings account in person, find a convenient location and schedule an appointment. If applying online, look for the account opening section and follow the instructions to apply.
Whether you apply in person or online, you must fill out an application form. Provide accurate personal information, including your name, address, contact details, Social Security number and employment information. If you're applying online, ensure the website has a secure connection to protect your data.
4. Add money to your account
Once you choose a bank and savings account type, you must fund the account. If you open the account in person, you can make your initial deposit with a check or cash. If you choose an online bank, you'll fund it through an electronic funds transfer (EFT). EFTs require connecting an existing bank account to the new one. Savings accounts may have a minimum or opening balance requirement. You can fund an account with any amount of money if there's no minimum balance requirement.
5. Establish internet banking
With the increased popularity of smartphones and accessibility to the internet, most people use online banking features. Most banks provide online banking services through the internet, mobile apps for mobile banking or both. Your bank can help you set up your account, but it usually consists of choosing a username and password. You can use the login details to access your account through your computer, phone or tablet at any time.
How to choose the right bank and type of savings account
Opening a bank account requires some research and work. The following four actions can help you choose the right bank and type of savings account for you:
Determine your savings goal
Consider your savings objectives and purposes. Do you have short-term goals like purchasing appliances or funding a vacation? Opt for an account with easy access. If you want to save $100,000 for retirement, or if you have any other long-term goal, open an account with higher interest rates and potential tax advantages.
Compare types of savings accounts
Make sure to compare each account’s interest rate, accessibility, minimum deposit requirement and other specific features. For your convenience, the table below summarizes how these factors vary depending on the account type.
|Type of Savings Account||Interest Rate||Access to Money||Minimum Deposit||Other Features|
|Traditional savings account||Low||Easy||Low||None|
|High-yield savings account||$Highest (variable)||Easy||Varies||None|
|Money Market account||Higher than traditional savings account||Easy||Varies||Check-writing privileges, ATM access|
|Certificate of deposit (CD)||Highest (fixed)||Limited||Varies||Fixed interest rate for specified period of time|
|Cash management account||Higher||Easy||Varies||Check-writing privileges, ATM access, high interest rate|
Compare interest rates
The best savings accounts provide higher-than-average interest rates and few or zero fees. When comparing accounts, start by looking at the stated interest rate. With some accounts, you'll earn only the stated rate. However, other accounts, including high-yield savings accounts, calculate interest more frequently, allowing you to earn more than the stated interest rate. High-yield savings accounts are typically offered by online banks and credit unions.
Check minimum balance requirements and fees
Some savings accounts require a minimum opening deposit. If the account has a minimum daily balance requirement, you must keep the balance at that level or above to avoid fees or earn interest.
Also, banks have different fee structures. Some banks charge monthly maintenance fees. You might also see differences in the number of withdrawals you can make or the overdraft fee amounts. You can find these details in the account agreement you sign when opening a new account.
Tips for maintaining and using your savings account
Opening a new savings account is just the beginning. Follow these tips to use your savings account effectively:
Keep track of your balance
Tracking your balance helps you watch it grow and provides a way to monitor your progress toward your financial goals. You can track your balance by visiting a bank's branch, website or mobile app.
Automate your savings
The best way to save money is through automatic transfers. You can set up a weekly or monthly direct deposit to send money directly into your savings account. If you work these deposits into your budget, you'll likely reach your savings goal faster.
Review your statements
Your savings account might provide monthly or quarterly statements electronically or by mail. Evaluate your statements when you receive them. Look at your deposits, fees, interest earned and your final balance for the period. Seeing your investment grow might encourage you to keep saving.
Limit your withdrawals
You can easily transfer funds from a traditional or money market savings account to a checking account, but doing so will impede your goals. Therefore, limit the amount of money you withdraw. If the bank offers a debit card with the account, it might be wise to turn it down. Having a debit card might encourage you to spend money from your savings account.
Reassess your account periodically
Occasionally compare your account’s interest rate to other banks’ rates. If you find a better rate elsewhere, consider switching accounts to maximize your savings.
How to open a savings account FAQs
What are the benefits of opening a savings account?
What factors should I consider when opening a savings account?
How can I get the most out of my savings account?
How much money do I need to open a savings account?
What are the different types of savings accounts available?
What is a joint savings account?
Summary of Money's how to open a savings account in 2023
Saving money is essential regardless of age. A savings account can protect your hard-earned money and help you achieve financial goals. To open a savings account in 2023, start by considering your goals and comparing account options. Once you have your savings account, remember to stay on top of interest rates and fees. Follow these tips and watch your money grow.