Having a savings account is important. It's a good place to store your emergency fund, which you’d tap if your car unexpectedly needed repairs or you had to weather months without a job.
But all savings accounts are not created equal, and there are important factors you should consider before opening one. Here are six features to look for if you are searching for the best possible savings account.
1. Interest rates
The single most important attribute of a savings account is its interest rate, of course. The problem is, interest rates attached to most savings accounts are frustratingly low, with many banks offering a minuscule interest rate of 0.01 percent.
You can’t grow your money quickly with a rate like that. But the argument has always been that savings accounts aren’t the place for stashing money if you want it to grow. Instead, it’s a safe place to keep money that you might need to access quickly for an emergency. But if you can find a higher rate, you might as well take it. They’re pretty rare. (See also: 5 Best Online Savings Accounts)
2. No monthly fee
You’d think that with such low interest rates, savings accounts wouldn’t come with fees. But several banks do, indeed, charge monthly fees to keep a savings account there. Usually, you must maintain a certain minimum balance to avoid those fees.
A bank might charge $5 per month if you don’t keep at least $300 in your savings account at all times, for instance. Even if you're pretty good about keeping enough funds in your account, why take the chance of incurring a penalty if you ever dip too low?
When you’re shopping for a savings account, be sure to pick a bank that doesn’t charge any monthly fees. These savings accounts are rarely worth the hassle. (See also: Are You Paying These 6 Unfair Banking Fees?)
3. No minimum opening deposit
Some banks require that you deposit a certain amount of money into your savings account when you open it. Usually, this is a small amount; say $25. This isn’t too onerous, especially because you are opening a savings account to actually put money in it, after all.
But if you want more freedom to start your savings account with an even lower amount, you’ll have to search for accounts that don’t require any minimum opening deposit. There are some out there, especially in the form of online-only banks. Just make sure that these accounts don’t come with any other fees that might haunt you later.
4. Automatic transfers
Saving money isn't easy. But if you can automate regular deposits into your savings account, you're far more likely to save at least some money each month.
You'll want a bank that offers automatic transfers from your checking to your savings account, and make sure that the bank doesn't charge a fee for this service. Even if you set up an automatic transfer of just $50 per month into savings, you'll have $600 after a year. That can add up. (See also: 5 Ways to Automate Your Finances)
5. Mobile check deposits
You just received a check that you'd like to deposit into your savings account. It's a hassle to head to your nearest ATM or bank branch, but mobile deposit solves that. You simply use your bank's app to take a photo of your check — front and back — and tell your bank to deposit that check into your savings account.
This was once a rare feature. Today, though, it's becoming expected, and it is awfully convenient. Whatever bank is behind your savings account, make sure it offers mobile deposits.
6. Easy withdrawal
What if you need quick access to your savings account to cover a financial emergency in the middle of the night? If your bank has a large network of ATMs in your area, you'll be able to get the money quickly. (See also: 6 Big Ways ATMs Are Changing)
Be careful, though, not to use your savings account as if it's actually a checking account. Federal regulations say that you can't make more than six withdrawals from your savings account a month. If you withdraw more, your bank will charge you fees for each withdrawal.
Some banks might allow even fewer withdrawals every month. Look into a bank's withdrawal policies before you take out a savings account with it.
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Savings accounts play a pivotal role in financial planning, serving as a safety net for emergencies and providing a place to accumulate funds. Let's delve into the essential elements mentioned in the article to consider when choosing a savings account:
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Interest Rates: The primary factor defining a savings account's value is its interest rate. A higher interest rate means more substantial growth for your savings over time. While many savings accounts offer minimal rates like 0.01 percent, seeking accounts with higher rates can significantly impact your savings' growth.
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No Monthly Fees: Despite low interest rates, some banks charge monthly fees for maintaining a savings account, often linked to maintaining a minimum balance. To optimize savings, it's crucial to choose an account without such fees, ensuring that your funds aren't depleted by unnecessary charges.
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No Minimum Opening Deposit: Some banks require an initial deposit to open a savings account. While this is often a nominal amount, seeking accounts with no minimum deposit offers more flexibility, especially if you're starting with a smaller sum.
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Automatic Transfers: Automating regular deposits into your savings account is an effective way to consistently save. Opt for a bank that facilitates automatic transfers from your checking to your savings account without additional fees, encouraging a disciplined savings habit.
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Mobile Check Deposits: Mobile check deposits through a bank's app provide convenience, allowing you to deposit checks directly into your savings account without visiting a physical branch or ATM. This feature is increasingly common and a time-saving asset for managing finances.
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Easy Withdrawal and Limitations: Access to your savings in times of urgency is vital. A bank's ATM network availability ensures quick access to funds. However, it's essential to be mindful of withdrawal limitations imposed by federal regulations. Most banks restrict withdrawals to six per month and may levy fees for exceeding this limit.
These factors collectively shape the suitability of a savings account, impacting its growth potential, accessibility, and convenience. Understanding these aspects helps individuals make informed decisions when selecting the best savings account that aligns with their financial goals and preferences.
