If you’re searching for a place to keep your money that you’ll use for everyday expenses, a checking account might be your first choice. But if you’re looking to set aside money for future needs and goals, opening a savings account is an option to consider. Saving a percentage of your income and putting it into a savings account can help you grow your savings while building a safety net fund.
How savings accounts work
You can deposit your money into a savings account, but it’s typically money that you don’t plan to spend right away. You can use a savings account to put away money intended for specific purposes and goals. For example, you may open a savings account to put away money for a down payment on your first home or to hold your emergency savings fund. A savings account keeps your money in a safe place until you need to access those funds.
When it comes to comparing a checking vs. savings account, the main difference is that a checking account may allow you to write checks or make purchases and ATM withdrawals using a debit card. Savings accounts don’t usually come with checks or debit cards. Checking accounts are typically for daily use while savings accounts are primarily for saving.
How to open a savings account
To start your journey, you can open a savings account at a bank or credit union and deposit money in your account, and the bank may pay you interest on your balance. Different financial institutions have different processes, but you can typically request to open a savings account either online, in-branch or over the phone. If there’s a minimum deposit requirement, you’ll need to deposit that amount. You may have the option to set up a recurring deposit from either your checking account or paycheck.
Why saving money is important
Saving money can help you deal with financial emergencies that come up down the line. It can also help you avoid debt, pay for large purchases, reduce financial stress and provide you with a greater sense of financial freedom.
How to pick the right savings account for you
Having a savings account can be beneficial, but it may not be easy to know which account to choose. There are a lot of banking options offered by a variety of institutions. When going through your options, consider the following:
- Decide how you’ll use it
- Figure out what features are important to you
- Decide what bank you want to use
- Consider interest rates
- Read the fine print for fees
How does a savings account grow?
If your bank offers an autosave feature, you can grow your savings with automatic transfers from your checking account to your savings account. Plus, a savings account is typically interest bearing and may earn interest depending on your savings balance.
You can use a savings account calculator to find out how much your savings will be worth. Using a savings account calculator helps you quickly estimate the growth of your savings.
Why would you put money in a savings account?
With so much to consider, it’s important to know the advantages of opening a savings account before you choose to do so. If you’re curious about opening a savings account or you have one already, keep these advantages in mind:
- Savings accounts are a way to save money
- Savings accounts in the United States are insured if they're opened at an FDIC-insured bank
Opening a savings account can help you save for a specific purpose and keep your focus on your future goals. If you’re looking to open a savings account, find one that works for you and your needs.