I remember opening my first savings account as an adult. I was around 18 years old, in college, and lured in by the promise of $10 to seed it.
Broke and knowing that I’d eventually need a savings account, I opened it up with the local bank.
I held on to that account for years, until I was forced to close it after moving to an area where the bank didn’t exist. Over the past 10 years, I’ve had accounts with about 3 banks and have finally landed on one that I believe is right for my money.
Here’s what I considered when choosing the right savings account.
How to Choose A Savings Account
1. Ease of opening and accessing account
Everything is about ease and convenience these days. Opening a bank account is no different.
Would it surprise you to know that I haven’t been inside of an actual bank in over a year? And the only reason I went in a year ago was because I needed a cashier’s check to make the down payment on our home. Not surprisingly, it’d been over a year before then for my last visit to join accounts with my husband.
With everything at the touch of our fingertips, I find no need to go into a brick and mortar bank for my transactions. That’s why I prefer a savings account that I can open and access without the hassle of having to find time to go to a branch.
When considering which savings account to use, I recommend considering online savings accounts for their shear ease and convenience. Online banking gives you the option of being able to access your accounts anywhere and typically come with 24/7 support via phone or chat.
Online banks also have the advantage of offering higher interest rates, because they don’t carry the overhead and expenses of maintaining a brick and mortar branch.
If you’re looking for a way to save and earning on your money, consider online banking for your savings account.
2. Minimum balance required & fees
I’m all about saving the coins, especially when it comes to fees. So, when considering a savings account, the minimum balance amount and associated fees is of utmost importance.
Some banks access fees for your account being below a specific balance. This is important if you are using your savings account to stash for a trip or to make big purchases, where funds will ultimately be coming out.
If you know that your account may fall under that minimum balance, it’s wise to avoid it and find a bank that doesn’t access fees. There are a few banks that offer minimal to no balance requirements.
3. Annual Percentage Yield (APY)
Admittedly, APY may be the single most deciding factor when I’m accessing a potential savings account. Why? Because it’s free money!
An accounts APY is the amount of interest that you will receive each year on the money held in your account. For example, if your accounts APY is 2.2%, that means you’ll receive $2.20 for every $100 in your account that year.
So imagine how much interest you can gain from having 6-12 months of an emergency fund in the right account!
Before you get too excited, know that the government will get their portion in taxes from the interest earned. If your account earns interest, you’ll have to submit at 1099-INT form to the IRS reporting your income from interest.