A savings account is one of the most important bank accounts that most people have, being the account that tends to be most used. Whether that be for saving money for a rainy day or stowing funds for the next big holiday, you must make sure you have the right account for you.
But how do you find the right account for you? There are a number of different factors you need to consider when choosing your savings account, not all of which are immediately obvious at first glance. Interest, insurance, ease of access, and extra features can all crop up in the conversation around savings accounts so it is important to get on top of what all of it means for you and for your investments. Read on for a checklist of everything you need to know before you open a savings account.
Easy Access Vs Notice Accounts
If your savings account is for rainy day funds that you need to access quickly, you’ll need to make sure that you get an easy access account, perfect for tucking away any money from your side hustles to use when you need it most. Easy access accounts mean that it is easier to withdraw money from than, say, a notice account. At the drop of a hat, your money can be back in your current account as you need. It’s important to read the fine print of any savings account that markets itself as easy access, however, as some accounts may restrict the number of withdrawals you can make, setting a specific number of withdrawals a year or month. If an account you are interested in limits your withdrawal amount, it is vital you make sure you won’t go over this amount at any point in the future, as doing so could lead to penalties such as losing any interest on the withdrawn amount.
On the other hand, you could look at getting a notice account if having immediate access to your savings isn’t your main concern. A notice account is, as the name suggests, an account that requires notice before withdrawing. More specifically, savers are required to inform the provider in advance for a conditioned period. While they can be up to 120 days, notice periods tend to begin from 30 days. These are great accounts for those who aren’t fussed about accessing their savings rapidly, as well as for those who would like to remove the temptation to make spur-of-the-moment withdrawals from their savings.
Certificates Of Deposits
Not everyone is looking for a short-term savings account, and this is where a certificate of deposit, or CD, comes into play. The question often asked is, “is a CD account even worth it?” as the idea of a fixed-length contract for a savings account is sometimes off-putting for some. Putting your money into a CD means losing access to your money for a fixed length of time, where it will either be inaccessible for that time or will grant you a penalty for early withdrawal. This isn’t an entirely negative occurrence, however. CDs are incredibly safe and well protected, being insured up to $250,000 by the FDIC. If you are planning on setting aside the money for a number of months or years, this will ensure that all of it is safe when you come back to collect it.
Not only are CDs fantastically safe, but they also tend to offer a higher interest rate than other saving accounts. They also offer fixed interest rates, so that you will be able to track your money and figure out ahead of time how much you will have to withdraw once the time is up. This can be useful not only for holding money for a long time, however. CDs can also be used to mature sums of money, finding the right interest rate to allow your money to grow and be ready for an important downpayment, such as for a car or house. This long-form saving method can benefit you substantially.
Look Out For Bonuses
Nothing is better than getting a bonus for setting up a new savings account. There are all sorts of bonuses that a bank may offer you to set up your new accounts, from cash in hand rewards to increased interest rates up to certain amounts or for a number of months/years. These can be brilliant for all sorts of people. Those who are keen to put a lump sum of money into a savings account quickly can benefit greatly from the increased interest rates, whereas those who are looking for a quick savings account may love the monetary rewards for setting up their new account to kickstart their savings.
However, you should keep an eye on the bonuses that are offered by the banks. Many of the rewards can end up being short-term, promising great interest rates for only a very short period of time and doing away with it the rest of the time. You should make sure to keep an eye out for when your bonuses change and move your money around to maximize the return you can get from your investments. There’s nothing wrong with picking an account just for the bonus, of course, but you should weigh up how long you have to keep your money in there and how much must be invested to start.
How Much To Start Your Account
Plenty of savings accounts can be opened with as little as $1, though others come with a minimum investment limit. Some can range from as much as $1000 to $100000, so make sure you have the minimum amount ready in the first place. A general rule tends to be that the bigger the lump sum you put away, the greater a return you can get back. So, if you have enough, it could be a good idea to put it into an account that needs a high minimum investment.
Conclusion
There are a large number of things to keep in mind when choosing a new savings account, but this guide has covered a large amount of what you need to know and keep an eye on when choosing your account. Make sure you take in all of the information in this article as if you do you should be able to find the best account for all of your needs.
