A bank account is one of the first steps Americans must take to start their journey into the personal finance world, and when you are beginning you can choose to have a savings account, a checking account, or both. These kinds of instruments allow you to save money in a safe place and earn a small interest on a monthly basis. They usually don’t require a high balance to open, since with barely $25 or less you have your own new account.
You have to know that this is not a matter of making money anymore. Instead, it’s a matter of getting your income and dividing it between the checking account, for daily expenses, and the savings account, where you will take part of your income and save it so you can use it in case of an unexpected situation, the so-called emergency fund.
The necessity of having a savings account comes due to the fact that you shouldn’t have your money saved under your bed, since it’s vulnerable to any exterior threads.
The savings account is the most basic financial instrument that you can use to save money and earn interest in the process. This type of bank account usually doesn’t give users a debit card or the possibility to write checks.
It’s a common belief that people tend to open a savings account with interest when they have short and long-term goals, like saving $500 for 10 months, rather than using that money for their daily expenses.
So, knowing this, is it a good idea to have this as a personal finance strategy?
The answer is yes. Having this kind of account helps you to actually differentiate the money you will use every day with the capital that you’ll save each month for other purposes. That way, you won’t feel the temptation of spending it or succumb to emotional purchases.
On the other hand, it helps you to create new and better financial habits, as well as make a stand with financial institutions. This is the beginning of new financial goals, like having access to better accounts with more benefits and credibility from banks.
So far they may be sounding like a great deal, but you haven’t gotten to the best part, the interest rates, which is that aspect of the economy that actually gives you more money. But, how do they work? This is one of the biggest questions you may have if your goal is to increase the earnings that your money can give you.
Let’s make it simple. Interests are the costs of borrowing money. So, if you borrow money from someone, you need to pay a percentage and if you lend it, you collect. This is what happens when you earn monthly interest in the bank with your savings account since you are allowing the financial institution to use your capital. As a reward, you earn some extra money that will be established by the general level of rates in the economy.
Now, these rates can vary depending on the bank and other external factors, as mentioned before, so people with clear financial goals use saving accounts with high-interest rates to reach them faster and be assured that they have their capital generating more money while turning it into an emergency fund.
Some of the best high-yield online savings accounts are listed as follows:
- Quontic Bank – 0.65% APY
- Live Oak Bank – 0.60% APY
- Vio Bank – 0.57% APY
- Synchrony Bank – 0.55% APY
Opening a bank account usually doesn’t take more than an hour, even less if you already know in which institution you want to open it. And now, you don’t even need to go to the physical building in order to do this, because you can just visit the bank’s website and open the account.
However, there are a few steps that you may want to take in count so you can be sure that you chose the right institution:
1- Select a bank
There are lots of banks that are willing to open you a bank account. But to make a choice, you need to compare their fees, rates, balance requirements, etc.
Once you’ve chosen one that fits all you’re looking for, you can enter into their website and start creating your account.
2- Gather your personal documentation
There are minimal requirements to open a savings account. Usually, they include Social Security Number, Driver’s license, and/or military identification. You also need to be above the age of 18.
Now, some institutions may have their own requirements, so it’s better if you can check those in their websites or speak with customer service.
3- Open it and fund it
Now that you’ve done all the previous steps you can open the account with that bank that fits all your criteria.
There’s a chance that you may need to fund it in order to activate it, and you can do this once you open it or later on. Also, depending on the amount of money you choose to fund your account, you can even create your own business savings account.
A savings account can be one of the best ways you can use, in order to set straight your personal finance strategy, since it can be an instrument to create your foundation for your short-term and long-term goals, as well as a way to secure your money even if you are a business or an individual.