Whether you’re saving for a down payment or building an emergency fund, opening a personal savings account can be a meaningful step toward financial security. Before you get started, here are five facts to help you make the most of your savings journey.

1. A savings account is for saving money – not spending it.

    Perhaps this goes without saying, but a savings account is not the same as a checking account. A checking account is where you keep money for everyday expenses, like bills or rent. A savings account, on the other hand, is for money you plan to use in the future, keeping it safe while it earns interest.

    Because of this core purpose, savings accounts sometimes have rules that could cost you if you don’t know about them. For example, savings accounts may have:

    • Limited transactions. Capping the number of monthly withdrawals or transfers encourages you to treat the account as a place to save, not to spend.1
    • Minimum balances. A minimum balance encourages you to keep funds in your account. Drop below the required amount, and you may pay a fee or earn a lower interest rate.

    These and other requirements help banks offset the cost of maintaining the account, but they also nudge people towards disciplined saving. Many banks reward that behavior by waiving fees when you meet certain requirements. Understanding these rules can help you use your account to the fullest.

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    2. Not all savings accounts offer the same interest rates or fees.

      Be sure to look closely at interest rates and account fees. Both can vary widely, and they directly affect how much you’re able to save.

      Comparing interest rates

      You’ll likely see the annual percentage yield (APY) mentioned in the account details when searching for a savings account. The APY tells you how much interest you’ll earn over the course of a year. 

      Be sure to note the APYs as you evaluate which savings account is right for your goals. A higher APY helps your money grow faster, but it may vary widely depending on the bank and account type. For example, a high yield savings account (HYSA) typically offers a higher APY than a traditional savings account. 

      Account fees to look for

      Another important comparison to make is account fees. These can also vary, but some standard savings account fees include:

      • Account maintenance fee.
      • Excessive withdrawal fee.
      • Minimum balance fee.
      • Inactivity fee.
      • Paper statement fee.

      You can usually find fee information on the bank’s website, often in a PDF linked from the savings account page or in the footer under “Consumer Pricing Information,” “Fees Schedule,” or something similar. A bank representative can also explain the fees associated with any savings account you’re interested in.

      3. Comparing APYs and account fees helps you choose a savings account that fits your individual savings goals.

      With a little research, you may even find a no-fee account that offers a competitive APY.

      Traditional and digital banks offer different experiences.

        Digital-only banks have gained popularity over the years, and for good reason. Because they don’t have to maintain physical branches, digital banks often offer higher APYs and fewer fees. 

        But in exchange for greater earning potential, you may miss the personal service a traditional bank can offer. Traditional banks usually provide a wider range of services, including cash deposits, safe deposit boxes, and instant access to debit cards. Plus, many traditional banks have digital platforms and mobile apps for your convenience.

        4. Choosing between a traditional and digital-only bank isn’t about right and wrong.

        Ultimately, it’s about finding an account that fits your needs and lifestyle. Opening a savings account requires basic information and a small deposit.

          Many banks ask for two forms of identification, and list what they accept on their website. You’ll generally need at least one form of government-issued identification, such as:

          • Driver’s license.
          • State ID.
          • U.S. Passport.
          • U.S. military ID.
          • Permanent resident card.

          Secondary identification often includes any of those, plus: 

          • Social Security card.
          • Utility bill.
          • Lease or mortgage documents.
          • Bank statement.
          • Pay stubs. 

          5. You may also need to make an initial deposit to open a savings account.

          The minimum deposit varies by bank, but many accounts can be opened with as little as $25 or less, and some accounts require no deposit at all. When a deposit is required, you can usually deposit cash, transfer funds from another account electronically, or use a check or money order. Small, steady deposits help build your savings over time.

            Every journey is made up of small steps, and your quest for financial stability is no different. Making even minor contributions to your savings account can add up over time, especially when you’re earning interest.

            Even better? Many accounts offer automatic transfers that make it easy to save money consistently. By regularly moving a small amount – say $5 or $10 – from checking to savings, you can steadily build your nest egg. 

            Chart your course with confidence.

            Your first savings account is an important step in your financial adventure. Take the time to compare options, choose an account that meets your needs, and set out on the path to a more confident financial future.

            Sources

            1 https://www.nerdwallet.com/article/banking/how-regulation-d-affects-your-savings-withdrawals