Pamela Peredo

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A typical savings account is a deposit account at any bank or similar financial institution (i.e. a credit union) that bears interest. Searching for the best bank to open up a savings account may depend on many factors, including interest rate, though most are low.

Savings accounts differ from checking accounts in that they generally have a limited number of transactions each month so they are not typically used for day-to-day banking. In addition to bank withdrawals, checks and debits can also be used to access funds from checking accounts, which is not the case for savings accounts. 

Savings accounts have a limit on the number of withdrawals and transfers per cycle, generally one month. There are generally penalties for additional withdrawals. Withdrawals from an automated teller machine (ATM) don’t count toward the limit of six transactions per cycle.

Where you decide is the best bank to open up a savings account, you will easily be able to set it up as it is standard practice at financial institutions, whether online or in-person. Generally, you will provide basic information (name, address, and phone number) and if you do not already have a checking account at that bank, you must provide photo identification and your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).

Individual Reasons For Opening a Savings Account

In order to determine the best bank to open up a savings account, you need to consider your main reasons for wanting to do so. There are many sound financial reasons to open a savings account, often based on the concept that it is easier to not spend money frivolously when it is not on hand.

By putting money into a savings account, you prepare yourself for the unexpected costs that often pop up in life. You are encouraging your own financial stability, particularly if you get in the habit of adding money to the savings account. Even contributing a small amount at regular intervals will add more money than you could have contributed originally.

Another key reason for searching for the best bank to open up a savings account is to have safe, liquid assets that are easily available when you need them. Though interest rates on traditional savings accounts are low, you do make some money on the interest and your money is guaranteed by the Federal Deposit Insurance Corporation (FDIC). This means all of your money up to $250,000 is federally insured and cannot be lost, unlike money you hold in the stock market or keep in your dwelling.

Setting Up Savings Accounts For Children

best bank to open up a savings account

You may seek the best bank to open up a savings account because you have, or anticipate having, a family. If you are putting the savings account in your name (or yours and your partner’s name) for that reason, it makes even more sense to put money aside in the account for preparing for unexpected costs. 

Another option for a family is to create savings accounts for your child or children. There are three ways to accomplish this, though rules vary on whether you can set up a joint account with your child. The other two types of savings accounts for children are custodial accounts.

A Uniform Gifts to Minors Act (UGMA) allows any kind of property, tangible or intangible, to be transferred to the custodian for the benefit of the minor. In the case of transferring only cash or securities, a Uniform Transfers to Minors Act (UTMA) can be set up.

Studies show children benefit immensely from having their own savings account for a number of reasons, including learning the value of saving money and preparing for the future. A Washington University in St. Louis-led study published in JAMA Pediatrics in 2014 showed that any amount of money a child holds in college savings accounts results in improved social-emotional health.

More Than One Type of Savings Account 

You may think that there is only one type of savings account, but there are actually several versions. In addition to selecting the best bank to open up a savings account, you should also be selecting what type(s) of account best meets your needs.

Even traditional savings accounts can be done on-site at a bank or through an online bank. There are different features to each that may make it the best bank to open up a savings account. One of the advantages of a brick-and-mortar bank is the opportunity to meet face-to-face with a bank employee to ask questions and get the fullest understanding of what it means to open an account with that institution. An online savings account will often provide a higher interest rate with fewer fees or balance requirements.

Some banks offer student savings accounts, which offer limited fees for high school and/or college students. A financial institution may even make goal-oriented savings account available with a specific investment opportunity as the final goal. 

Savings Account Variations 

When choosing the best bank to open up a savings account, you can also consider other variations. Variations of savings accounts include a certificate of deposit (CD), money market account, individual retirement arrangement (IRA), college savings account (529 plan), and a health savings account (HSA).

CD’s earn a higher interest rate than a traditional savings account and is available at whatever you choose as the best bank to open up a savings account. The difference between the CD and the traditional savings account is that you must keep your money in the CD for a specified amount of time to get a higher interest rate.

A money market account is similar to a CD in that a bank provides a higher interest rate, but it has more flexibility in that a bank may also offer a debit card and checks with the account. Generally, a minimum balance needs to be maintained and fees are assessed if the account falls below that balance.

529 plans are savings accounts that are set up specifically for educational expenses. Although contributions to the plans are not tax-deductible, the interest and growth are tax-free and distributions are not taxable provided they are used for qualifying educational expenses.

HSA accounts allow you to make tax-free contributions to pay for qualified medical expenses. As long as you are enrolled in a High Deductible Health Plan (HDHP), you could potentially lower your overall health care costs by paying with untaxed money.

The Best Bank to Open Up a Savings Account: Brick-and-Mortar 

If you have decided the best bank to open up a savings account is at a brick-and-mortar bank, you can determine exactly which one is right for you with some quick research. A good source for information on banks in the U.S. is Bankrate, which compares rates on numerous financial products and any associated fees.

The three largest banks in the U.S. are JPMorgan Chase, Bank of America, and Citigroup. The interest rates at all three are minimal, which is standard for in-person banks. Fees can be avoided by using direct deposit or keeping a minimum balance.

Choosing the best bank to open up a savings account may depend on access to the bank, ATM, and/or customer service. Chase and Bank of America both have more than 4,000 banks in the U.S., while Citigroup has nearly 2,500 worldwide. Citigroup has 65,000 fee-free ATMs in the U.S. and thousands more throughout the world. Case and Bank of America each have about 16,000 ATMs in the U.S.

According to Bankrate and another non-affiliated source, NerdWallet, each of the three largest banks has perks that may make it your best bank to open up a savings account. Chase offers sign-up bonuses for new customers. The bank is in 30 states and is one of the few banks adding branches.

Bank of America is accessible in terms of location, being in 40 states, with many hours of customer service available by phone and a responsive customer service Twitter account. Citigroup has a large footprint worldwide, allowing it to offer coverage and products on a global scale.

The Best Bank to Open Up a Savings Account: Online 

Perhaps the best bank to open up a savings account for you is an online bank. Higher interest rates and lower fees are the key features of online savings accounts. There are many websites that update the annual percentage yield on a regular basis. This may be the key factor if you are choosing the best bank to open up a savings account based on how much money you can earn by having money in the account.

The main factor in choosing the right online bank for you is how much money you will initially deposit. Some accounts require a large balance to earn the best APY, while others offer the same APY for even minimal deposits and balances.

Some large financial companies offer significantly higher interest rates than brick-and-mortar banks without any minimum deposit to open the account. Marcus by Goldman Sachs consistently has high APYs with no minimums or fees associated with it. Likewise, Barclays Bank does not require a minimum balance and does not assess monthly maintenance fees. 

American Express offers high-yield savings account without fees or minimum balance requirements. Discover also has a savings account without a minimum balance or fees, while also offering bonus incentives if you deposit large sums initially. Ally Bank is an online bank without minimum deposit requirements or fees.

Choosing The Best Bank to Open Up a Savings Account 

Once you have decided to open a savings account and your reasons for doing so, it is time to choose the best bank to open up a savings account. You start with the options that meet your individual and/or family needs. 

Do you want to hold an account where you can routinely go to deposit or withdrawal funds? Do you want to be able to ask questions in person about your account and other financial products? Then the best bank to open up a savings account for you is probably a brick-and-mortar bank. Your research will start with banks that have branches in your area and then you can make your decision on which bank offers what appeals most to your wants and needs.

Are you more concerned with holding an account that yields more interest than with the bank having a physical structure? Is it important for you to not have any fees associated with the account? Are you not able to maintain a large sum of money in the account? Then the best bank to open up a savings account for you is more likely with an online financial company or institution.

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