How to Open a Savings Account
Opening a savings account is a great way to keep your money safe and secure. Senior citizens have multiple choices when it comes to bank accounts.
Let’s take a look at how to open a savings account and the options available, so you can decide whether it is a good idea for you to open one or not.
What is a Savings Account?
A savings account is a bank account that serves to grow interest on your money. A savings account typically does not have a linked debit card and transactions are limited. This varies from bank to bank so make sure to ask your bank about all the details of your new savings account.
Unlike a checking account, you cannot write checks and the transfer options are limited. A savings account is exactly what it says it is — to save money. By making the funds less accessible than a checking account, chances are that the money will grow with interest over time. Interest rates vary and you should also make sure to ask your bank about their specific policies regarding interest rates.
A savings account is still more accessible and open than a retirement fund, for example. Transactions are limited, but they are not blocked. You may gain access to your money should you need it. But remember, the more money you have in the savings account, the more interest you will make.
Why Open a Savings Account as a Senior?
It’s recommended to have a three to six-month “cushion” fund in a savings account if it is possible for you to do so. When your money is in a checking account with a debit card, it is easy to overspend. A savings account is not off-limits but withdrawing the money takes more steps — steps you may end up not making if you don not really need the money.
As a senior, you probably have fewer expenses than you did when you were younger, but you may be hit by an unexpected emergency that requires immediate funds: the car breaks down, a family member is in need, a much-needed get-away. You may also want to save for retirement. There are various reasons why you would need some extra money.
So basically, a saving account makes it harder for you to withdraw your money so that it can stay in the bank longer and grow interest. Simply put, the bank pays you to leave your money in the account.
What You Need to Know About Opening a Savings Account
Opening a savings account is quite easy. You’re walking into the bank asking them to take your money and keep it for a while, so they do not make the process really complicated. Banks also make more money through savings accounts than checking accounts.
You’ll need some type of identification and an initial deposit amount. This varies greatly, but many banks require a minimum of $100 to open a savings account. Some may even open a savings account with a simple $1. Check with the banks in your area what their specific requirements are for opening and maintaining a savings account.
A lot of banking is done online now, but that may not appeal to you. It takes a little tech-savviness. If you do have that knowledge, then look into opening a savings account online. Typically, they offer the best interest rates.
Best Types of Savings Accounts for Seniors
Most banks have special benefits for senior citizens (over 65) like lower transfer fees and higher interest rates.
Annual percentage yield (APY) typically offers 0.01% to 0.07% on savings. This is calculated monthly and will generate less money than a saving account with compound interest. Compound interest yields around 1%, sometimes more, and is calculated daily.
A few of the banks that offer great benefits for seniors are:
- Capital One Bank
Capital One Bank is one of the banks with the best interest rates for seniors on the market today.
Discover is another bank that offers high interest rates to seniors.
- Citizens Bank
Citizens Bank also boasts good interest rates and several options for senior citizens.
- TD Bank
TD Bank is a top contender with excellent benefits on savings accounts for seniors.
Things to Consider When Opening a Savings Account
You need to think of a few things that are important to you and your lifestyle when choosing a bank for your savings account:
- The minimum amount required to open and maintain the savings account.
- Interest rates on savings in your account.
- Customer service quality, both in-person and online.
- Bank branch locations. (Do you drive or take public transport?)
There are several reasons to want to open a savings account as we get older, but the main reason is to store your money in a safe place that grows with interest and that is still accessible (although not as easy as with a checking account).
Whether you have an objective, like a big purchase, or you simply want to save for the rainy days, opening a savings account is a wise decision.