Opening a savings account is one of the most basic steps in financial planning for the future. Using a savings account is a great option for many different situations, including a rainy day fund, a child’s first account, saving for college or a retirement fund. Savings accounts are widely available, but vary greatly in both fees and returns. As a result, thoroughly researching investment options is a crucial step prior to opening an account in order to have the principle grow as much as possible.
Almost all banks offer several different types of savings accounts. Most have a tiered system, where the smallest deposits earn the least interest, and larger investments receive more competitive rates. When opening a new account, a customer should inquire about the current rates available, so they have an idea of what type of returns to expect.
In addition to traditional banks, many online savings institutions are also available. Online-only banks do not have a physical branch or office for customers, which tends to equate to both reduced business costs and increased interest returns on savings accounts. Registration forms can be filled out online, and the savings account can be accessed and funded via the internet. This type of account is better for a long-term savings plan, as it tends to provide higher interest rates and returns.
With either type of savings account, it is a good idea to regularly monitor the funds in the account, either through monthly statements or through online account access. When opening an account for a child, letting them view the monthly statements and explaining what they mean is a practical and educational exercise which lets the child see how their money is growing.
Regular deposits to a savings account add up quickly, and they can often be scheduled to occur automatically. Many banks, especially online institutions, offer recurring transfers for savings accounts. Although a small weekly transfer may not seem like much, even a $10 deposit scheduled to occur automatically each week adds up to over $500 each year in a savings account.
A savings account is a useful and practical tool for both adults and children. Children can learn the value of money and how the banking system works by opening and monitoring a savings account with the help of a responsible adult in their life. Adults of all ages benefit directly from savings accounts, as they earn interest on the account. A savings account can be used as an overall financial plan in order to achieve specific financial goals throughout an individual’s life.