Opening a savings account at a bank or credit union has several benefits. Savings accounts don't pay much interest, but your money is insured by the Federal Deposit Insurance Corporation. You can use a savings account to get started putting money aside and develop the habit of saving. A savings account enables you to accumulate a reserve of ready cash for emergencies. Bankrate.com says a family needs at least enough in a savings account to cover three months of expenses. If there is only one wage earner in a household, you may need as much as a nine months of living expenses in reserve as a financial safety net.
Savings Account Requirements
Opening a savings account is a straightforward matter of completing an application form and making an initial deposit. You will be asked to provide certain information, typically including:
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- Your full name
- Present address and phone number
- Valid email address
- Date of birth
- Social Security number
You must show a government-issued photo ID, such as a passport or a driver's license. When you open a savings account as a joint account, the other account holder must furnish the same information and identification. If you are under age 18, a parent or guardian must open the account with you as a co-owner.
You must make an initial deposit to open a savings account, but the amount is usually small. Traditional banks may ask for only $25. An online bank might offer savings accounts with no minimum requirement. Regular savings accounts typically pay the lowest interest rates. A money market savings account often pays more, but may come with higher opening deposits and restrictions on withdrawals. Shopping around is worthwhile. Credit unions and online banks usually offer higher rates than traditional institutions.
Some banks charge you a monthly fee if you fail to keep a minimum balance in a savings account. For example, you might be charged $5 per month when the account balance falls below an amount set by the bank. Not all institutions do this, so ask about fees and terms before opening the account. Also, banks may waive these fees if you link the savings account to a checking account at the same institution. Another way to get a waiver of fees is to arrange to have a deposit automatically transferred from your checking account into the savings account each month.