How to Open a Savings Account?

At any point of your life, you will come across it & at that time you MUST know that, How to Open a Savings Account? So this article is all about Basics of opening a Savings Account.

Overview -

Savings account is for your short term savings needs. Say for Example, if you want to buy a car and want to save money for it than Savings account is for you. You save money every month until you save entire corpus for the down payment of your car. The benefit of Savings account is that, along with Savings, it will provide you interest income. Of course, the interest earning from savings account is very low. But its still good than nothing. However, Savings account is not for Investments. If you want to save money only for the purpose of its growth than there are many Investment Vehicles available in the market.

In general, You can park your short term (Up to 1 year) Money/Liquid Assets into Savings Account.

What is Interest Rate & How much it is? -

The second question comes is, What is the interest rate? Well, in simple language, Interest rate is the Rental on your Money / Liquid Assets. If you have an apartment and you give this apartment to some tenant than that tenant will give you a Rent and this Rent will be your Rental Income.

The same is true for Savings accounts. When you put your money into your savings account, it means that you are lending this money to the bank or Financial Institute. And that Bank / Financial Institute will give you a Rent (Interest) on your parked money.

Say for Example, if you put $ 1000 in your Savings account and the Interest rate is 5% than at the end of year, the Bank will give you $ 50 as an Interest rate. In short, Interest is the Rental on your Money / Asset.

Before Choosing a Bank / Financial Institution -

It is not that, only Banks provide Savings account facility. Many Mutual Funds, Corporates & Financial Institutes also provide the Savings account facility. So you should check the following criterias before choosing a bank in which you want to open a Savings account.

- Accessibility
- Interest Rates
- Customer Service
- Services Offered

Types of Savings Account -

Not all savings accounts are created alike. Here are some of the most common types of savings accounts:

1. Basic Savings Account: This is the most basic type of savings account that banks will usually offer. People can deposit and withdraw money from their account, the balance of which usually earns a minimal rate of interest (usually around 0.5 - 1% yearly). While savings accounts usually don't allow you to write checks or to take money out of an ATM, this can be a good thing when you're trying to save money.
2. High Yield Savings Account: High yield savings accounts usually offer better interest rates than regular savings accounts (sometimes 2% more), but come with more restrictions. Most high yield savings accounts have a minimum balance requirement and limit the amount of transactions that you can make each month. If you have enough money and don't see yourself needing to take money out of your account on a regular basis, this can be a good option.
3. Money Market Account: In general, money market accounts usually pay a higher interest rate than regular savings accounts (and often give you a higher rate for a higher balance), although they carry many of the same restrictions as a high-yield savings account. They do, however, offer you the ability to write checks if you want.
4. Online Savings Account: With the recent emergence of online banking, many institutions have begun to offer high-interest online savings accounts (anywhere from 4 - 6%). The reason that these institutions can afford such a high interest rate is because, since all of your banking is done online, they usually don't have pay the high overhead costs associated with operating a bunch of actual brick-and-mortar bank branches.

Things to Consider Before choosing a Savings Account -

- Minimum Balance Requirements
- Monthly Fees
- Interest Rates
- Access to your Money

Conclusion -

The first step of Financial Freedom starts from “Saving”. If you never Save & Invest your money, it will never work for you and the compound interest will never work for you and you can never be Rich or Financially Free. No matter what you are today, A Savings Account is for everyone. Weather you are a School going Kid, Student, Teacher, Doctor, Lawyer, Entrepreneur or anything else, The Savings Account is MUST for every one…!!!