Which Savings Account is Best for Your Needs?

Are you preparing for your financial future? Opening a savings account is a great first step. It's also a good way to save money for a rainy day or even for a planned special purchase, such as a vacation or retirement. Whether you choose a brick-and-mortar banking institution or an online bank, placing funds into a savings account is a good investment, but which one is best for you?

Which Savings Account Is Best?

There are different types of savings accounts, so be sure to do your research before choosing.

If you're looking to save for shorter term goals or even to build your emergency fund, you might consider opening a high yield savings account. Or, perhaps a money market account that pays a high interest rate is a good fit.

For longer term goals, such as a down payment on a new home, a certificate of deposit may be a good option. There are actually a few different types of CDs to consider as well. For example, a bump-up CD may be a great fit if you're looking to keep up with competitive interest rates for a longer term financial goal. And, if you're saving for retirement, you might consider an IRA account in addition to the retirement program offered by your employer.

Clearly, there are many options to review. In doing so, it'll be important to keep your personal target end goals in mind.

Savings Account Features to Consider

Choosing the right savings account may seem overwhelming, but there are tips to bare in mind when selecting a savings account and financial institution. Here are 8 key features to focus on as you search for the best savings account:

1. Open an account instantly: The best banks allow you to open an account online quickly and easily, without the hassle of having to visit a brick-and-mortar branch. Online banks often provide fast, streamlined applications to open an online savings account.

2. No minimum deposit or minimum balance requirement: Saving money can be hard—especially for young people just starting out. In fact, research shows that the average millennial net worth is only $8000. Some banks charge their customers a fee for failing to maintain a minimum balance, which, on average, is $3.30. A bank account with no minimum deposit or balance requirement makes it easier to save since you won't lose your savings to fees.

3. No monthly service fees: Maintenance fees or service fees can quickly diminish your savings. The best banks offer a savings account with no monthly service fee. Many online banks provide a savings account option with no monthly maintenance fee. Since online banks don't have the costly overhead associated with a branch network, they often pass those savings on to their customers by charging low or even no fees at all on their online services. Be sure to inquire whether the bank charges any maintenance or service fees before you open your account.

4. Higher interest rates: Look for accounts which offer higher interest rates. As of November 2022, the Bankrate reports the national average savings account offers an interest rate. Most online banks, like Synchrony Bank, will have their APY set well above the average.

5. Online transfers between accounts: Online banking gives you more control of your money and easy, instant access to your savings. It can also help you to save by allowing you to transfer funds from your checking account into your online savings account.

6. Broader ATM access: Parking your money in a savings account doesn't need to mean losing access to your cash at an ATM. Online banks often reimburse fees for using your ATM cards at other banks' ATMs. The bank you choose should generally also offer electronic transfer to other bank accounts as an alternative option for accessing your money. If you're opening an online high yield savings account as an emergency fund, it's important that the money is accessible at all times.

7. Direct deposit into savings and automatic savings transfers: Financial experts recommend finding an account that allows you to directly deposit a portion or all of your paycheck into your savings account. This way your money instantly moves into savings before you feel tempted to spend it. Using an automatic savings transfer feature also helps with saving, as your money will transfer automatically from your checking to savings account at set intervals.

8. FDIC insured: Make sure that your savings account is insured by the Federal Deposit Insurance Corporation (FDIC). That means that your money is protected up to $250,000 per depositor for each ownership category in the event of a bank failure.

What You May Need to Open a Bank Account Online

• • Name
• • Date of Birth
• • Address
• • Social Security Number

Depending on where you choose to open the account, the required information you must submit may vary. Having everything at hand when you apply to open your online savings account will make the process fast and easy.

How Much Should You Be Putting in Your Savings Account?

If possible, aim to save 20% of your monthly income, which can be put toward:

• • An emergency fund. Save three to six months of living expenses in case of a job loss, medical expenses or other unplanned events.
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• • Rainy day fund. This type of savings account covers expected but expensive costs like car repairs, home maintenance, braces for your kids and other purchases.
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• • Down payments. Your monthly savings can go toward a down payment on a large purchase like a house or car.
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• • Experts recommend keeping 10 to 15% of your income for retirement savings starting in your 20s.

A savings account can help maximize the money you set aside and keep you organized as you work toward these financial goals.

 

LEARN MORE: Tips to Save for 5 Key Milestones in Life