How to Choose the Right Savings Account
If you have decided to open a savings account to save for a rainy day, for university tuition or for a down payment on your first home, you may be wondering which savings account is right for you. Just as there are many reasons people save money, financial institutions and banks offer all types of savings accounts. You should not let the abundance of options scare you away from a savings account, however. By looking at a few things, you will be able to know which savings account meets your needs.
Fees, Deposits and Minimum Balance Requirements
The first thing many people look at when shopping for savings accounts is the interest rate offered. They want to put their money where it will do the most good. Most savings accounts which offer high-yield interest rates require higher deposits or minimum balances. Some could require you keep a balance of $5,000 or more on a regular basis or they charge monthly fees to your account. Since those fees can reduce or wipe out earnings from interest, you need to find an account with requirements that fit your needs.
Look for a savings account that does not have a monthly fee and has deposit requirements you can meet. A basic savings account usually requires a relatively small minimum initial deposit, often as low as $100. While these accounts do not earn much in the way of interest, they are hassle free and you will not have to worry about fees. If your personal situation is such that you can maintain higher balances in the account, you may want to look into options that yield higher interest. You should remember, however, that most financial experts do not look at savings accounts as a wealth building tool. They are simply a way to put money away for later while obtaining ease of access.
Online Versus Local Branch Savings Account
It is important to understand the services offered when choosing which savings account is right for you. There are savings accounts that offer services through local branches. For these accounts, you would make deposits and withdrawals at the teller counter of your bank. You may also be able to do so through ATM machines associated with the account.
Some institutions are completely virtual. This means all transactions are conducted using the internet. You make withdrawals and deposits by linking the online account to your checking account, and there is not a local bank branch you can visit. Other savings accounts combine local and online access. For these accounts, the bank offers an online portal for access. You can do your banking virtually or in person. The account that is right for you depends on your personal needs, your ability to access the internet and your comfort level with virtual banking.
Other Questions to Ask When Looking for a Savings Account
Once you have found an account that meets your financial needs, there are a few questions you should ask the bank prior to opening a savings account. Find out if the bank is FDIC insured. This means that any account with a balance under the insured amount is backed by the government in case the bank becomes insolvent. You should also ensure there are customer service options that work for you, such as physical locations, telephone help-lines or online access.