Opening a savings account may not be one of your top priorities if you’re someone who is living paycheck to paycheck. Even if you can’t set a lot aside every time you get paid, it’s still important that you consider opening a savings account. A savings account is one of the fundamental and most crucial foundations of any sound financial planning. You should have at least one designated savings account no matter what your income is. Once you are ready to open a savings account, there several things that you need to consider to make sure that you choose the one that works for you.
To help you get started, here are some questions you need to ask before signing up for a savings account.
What kind of financial institutions offer savings account?
The two main types of financial institutions that you may consider for opening a savings account are banks and credit unions. If you don’t know which one to pick, do some research to find what each of them offers when it comes to savings. You can check for the requirements, the interest rate, how much you will earn with your savings from them and so on.
What types of savings accounts are available and what is the best type to open?
There are several types of savings account that you can choose from, but there is no one-size-fits-all type of savings account. You need to find out how each one is different from the other and pick the one that will fit your needs. If you would like to start saving with the minimum deposit, the best place to start with is a regular savings account. If you are planning to save a bigger amount of money that isn’t going to be used for your daily living expenses, you may consider a different savings account like a money market savings account.
How much will I earn?
Most people focus on the APY or annual percentage yield when opening a savings account. This refers to the interest that you earn for keeping your money in the bank or credit union. While banks differ when it comes to the rates they offer, there isn’t much of a difference. Most banks offer between 0.01% and 0.05%. Some banks also offer tiered yield structure. This means that you could be offered a higher APY if your savings account balance exceeds a certain amount. This structure might be appealing for those who have really have a goal to grow their savings.
While APY is an important consideration, there are also other essential points you need to think about before you open a savings account. You also have to check and compare maintenance fees of minimum balance. You may find a bank that offers a higher yield but the minimum balance is not viable for you. Make sure that you consider other factors that make it a better fit for your needs and lifestyle.
What is the initial deposit requirement?
Opening an account will require you to put down an initial deposit, although most banks would only require small amounts. If a bank offers a higher yield, expect them to require you to make a larger initial deposit. If you only want to open an account to start saving up, it would be a better idea if you look for an account that doesn’t require an initial deposit.
What are the minimum balance requirements if there are any?
Some savings accounts do not require a minimum balance but if you’re willing to keep more money in your account, you might be able to find a higher yield. Take note that if there is a minimum balance requirement, you can be charged a fee if your balance goes lower than the prescribed amount. If you don’t plan to keep your money for long or you’re planning to use it for short-term goals, find an account that doesn’t require a minimum balance.
Now that you know the essential points to consider before you open a savings account, it’s time to take the next step. Reach out to a Calcite Credit Union representative for more information about savings in a credit union.