Any good financial plan requires a savings account as its basic, initial building block. But with the complex financial instruments that come with it, you must first make sure to understand its risk/reward qualities.
Before you open a personal savings account, it’s best to ask the following questions to avoid making the wrong commitment.
1. What are the different types of savings accounts available?
Chances are, you wouldn’t find a one-size-fits-all savings account. Various life circumstances may alter which type of savings account is best for you. Mostly, a regular savings account is a good place to start if you want to begin with a minimal deposit.
Pick one that best suits your needs among the different savings account available. Make sure to choose one that offers insurance and that you can have immediate access to when needed.
2. What are the minimum balances and fees included in this type of savings account?
Compare the fees and minimum balance requirements for the different types of accounts available in a bank. Next, compare those to the requirements of other financial institutions. This way, you’ll be able to determine the perfect savings account that meets your financial capabilities.
3. What is the required initial deposit?
When opening a savings account, the bank may need you to make a minimum deposit. However, if you’ve chosen an account with a higher yield, you may need to provide a bigger initial deposit amount.
If you intend to open a savings account with money that you already have at hand, an initial deposit may no longer matter. But if you want to open an account to start and build your savings, it would make sense to pick an account with no minimum initial deposit.
4. How can I avoid the monthly fee?
Most banks will charge a monthly fee for their basic savings accounts. This is typically easy enough to avoid, but note that you will first need to qualify for the bank’s exceptions.
5. How can I earn the highest interest rate with my savings account?
You are likely to earn good interest rates by placing your money in Certificate of Deposits or CDs. Typically, large amounts deposited in a CD will earn a higher interest rate, like leaving your money inside the account for a long time.
6. What happens to my money inside the savings account if the bank fails?
It’s important that you feel safe with your bank. Your hard-earned cash should have an insurance to protect yourself from unforeseen tragedies. As long as your savings account has insurance, you can be assured that your money is safe.
7. How convenient is the bank’s location?
With the existence of the internet, you may now prefer banking online. But there are also instances wherein you need to visit the bank personally. This is why you have to make sure that your bank’s location is accessible and not too far from your home or workplace so you can always make a quick stop.
You need to check your bank’s operation hours, too. It will be quite troublesome for you if your bank is only open during your working hours. Choose a bank that can most conveniently cater to you when you visit.
8. Do you charge a fee for transactions done in my savings account?
Check whether the bank will be charging fees for transactions done offline or online. Preferably, opt for a bank that doesn’t charge online transactions and offers unlimited transactions on all ATMs.
9. Do you have any reward programs or exclusive deals that come with the account?
Most banks offer reward points for transactions done through debit and credit cards, internet banking, or via a mobile app. You can redeem the points you earn through cash discounts or by choosing exclusive offers.
10. Is using the ATM for free?
ATMs enable you to withdraw your money from the savings account without having to walk up to the counter. But remember that some banks charge you for ATM withdrawals when you use machines by third parties or other banks. So choose a bank with a large network of ATMs to avoid incurring fees during withdrawals.
Now that you have an idea of what to look for in a savings account, you can take the next step to reach your financial goals. For example, in the event that you need to take out a personal emergency loan, your savings account can increase your chances of getting approved. Having a personal savings account and using it to pay your debt can also enhance your credit score.
There are countless benefits that come with opening a savings account. The earlier you open one and start saving, the sooner you can build a good fund for your future.
